FINANCIAL TIPS
For small busines owners
Accounts Receivable (money owed to you)
Finances play a vital role in the success of every business, but financial management often falls on the back burner, because of the countless other responsibilities business owners juggle. Bookkeeping is time-consuming, requires specific knowledge, and may feel intimidating – which is why it gets put off. In fact, 25% of business owners are behind on their bookkeeping for these very reasons.
Keeping your books up to date enables timely and meaningful financial decisions and maximized tax savings for your business. Accounting helps you evaluate your past business performance, make timely decisions, and inform projections for the future.
While financial management may feel stressful, there are steps that can be taken to save time and ensure accuracy in your financials. We have compiled our top financial tips to help you keep your bookkeeping and accounting on track and grow your business!
Take Advantage of Technology
The days of physical ledger books are behind us (thankfully)! There is a large pool of accounting software available to business owners, all designed to streamline the bookkeeping and accounting process. Take advantage of accounting technology to optimize your time and keep your records organized!
Here are a few examples of best-in-class software that you can utilize to improve accuracy and keep your books up to date:
Categorize for Insight
Different aspects of your finances should be categorized in the Chart of Accounts. The Chart of Accounts is a record of each type of asset, liability, equity, revenue, and expense within the company. It provides a high-level view of every area of your business that spends or makes money. The goal of the Chart of Accounts is to organize information in the most informative way possible, so that it can feed useful information to your financial statements, such as where you spend or make the most money.
You can create your own Chart of Accounts, or use the standard Chart of Accounts that is an included feature in accounting software such as QuickBooks Online and Xero. It can be customized to the way you run your business!
Key accounts to keep track of are:
Separate Personal and Business Bank Accounts
Many business owners use their personal funds to keep their business running when they are first starting out. Continuing to mix personal and business finances could create problems in the future, especially for bookkeeping, accounting, and taxes. Important decisions could be made based on over or understated numbers. Plus, it is a red flag to the IRS.
Keeping your personal and business expenses under one bank account is referred to as commingling. It can draw scrutiny from the IRS and cause legal problems under certain business structures.
Commingling also increases the risk for error while bookkeeping, and takes additional time to account for your expenses properly. Important business transactions could be missed, or personal expenses could be added to your business records by accident.
Bookkeeping is tedious enough. Having to sort through personal and business expenses will only make it that much more stressful and time-consuming. Creating a separate business bank account will save you time and frustration, prevent commingling, and reduce your stress while doing your bookkeeping and accounting.
Get set up in minutes, for $0.
Want to learn what Xendoo can do for you? See for yourself with a free trial.
Review Your Financial Statements
Hire an accountant who is available to communicate with you regularly. Make sure they understand your goals for the business and any upcoming changes, especially plans for growth. The more tuned in they are to your business goals, the more they can advise you on the steps needed to achieve them.
Throughout this guide, we have briefly mentioned financial statements. Three important statements are the Balance Sheet, Profit & Loss Statement, and Cash Flow Statement.
The Balance Sheet
Summarizes your business’s assets, liabilities, and equity at a specific point in time. This statement provides insight into your cash, inventory and other asset levels, how much money is owed to you (Accounts Receivable), how much money you owe (Accounts Payable), credit card and bank balances, and the equity in the company.
The Profit & Loss Statement
(Also referred to as an Income Statement) shows Profit and Net Income. Your Net Income provides insight into the profitability of your company, and includes all the operating costs of your company.
The Cash Flow Statement
Allows you to see when cash flows into and out of your business, and how your cash balances have changed over a period. It can also be used to project cash needs of the business.
The best practice is to review each of these financial reports on a monthly basis, as they gauge your business’s financial health and provide insights to timely decision making. They provide visibility to indicate whether you are on track to meet business goals, make projections, and even prepare you for tax season. Whatever type of business you run, it is crucial to stay on top of your business’s financial health.
Xendoo is Here to Help
Real people. Real bookkeepers. Real CPAs. All focused on your financial success. You deserve an online accounting team that is dedicated to the success of your business. Let Xendoo handle your bookkeeping while you put more money in your pocket, reduce your stress, and get back to what you love to do
