One of the major challenges in running a small business is managing your cash flow. Cash flow problems account for 82% of the businesses that shut down.
Improving your cash flow requires your back-office accounting to be efficient and error-free. Organizing your business’ accounting and bookkeeping can take up a big chunk of your time, but it’s something you can’t ignore.
This blog will discuss some bookkeeping and accounting tips that can help you.
1. Choose an Accounting Structure
Choosing the right accounting structure for your business is crucial. Discuss with your accountant whether accrual accounting or cash-based accounting is best.
Accrual-based accounting records transactions when they’re agreed upon instead of when they’re completed. Larger corporations generally prefer accrual-based accounting because it’s useful in deferring payment and performing credit transactions.
In cash-based accounting, revenue and costs are documented when the transaction happens. This type of accounting is best for small businesses because they usually don’t hold big inventories or perform credit transactions.
2. Keep Your Expenses in Check
You can’t afford to burn money like larger corporations as a small business. Keep an eye on your expenses and reduce them as much as possible. This doesn’t mean not spending where necessary but cutting down on expenses that bring lesser value.
3. Automate Manual Processes
Automating routine manual tasks is one of the most important things for your small business in these modern times. Many accounting activities are often repeated and take longer than they should. Moreover, manual tasks always have a possibility of human error.
4. Categorize Expenses
Categorizing your expenses can help you eliminate unnecessary costs and spend wisely. It can also help with your tax planning. Some of the most basic categories are bill payments, administration costs, vendor payments, miscellaneous expenses, etc.
5. Don’t Mix Personal and Business Banking
Once you get your SSN (social security number) for being a sole proprietor or the EIN (employer identification number) for starting a firm, make sure you get a separate bank account for your business.
A separate bank account can help you focus on business statements better, save u time, document your transactions properly, and help with tax planning.
These goals are achievable if you work with a certified public accountant in USA. If you’re looking for one in San Francisco, California, Nidhi Jain is an Indian CPA who runs her accounting firm. We provide accounting and bookkeeping services to our clients. Apart from this, our services include tax planning, tax filing for individuals and businesses, and payroll services in Bay Area. Contact us now for more information.