Small business owners are often required to wear many hats, overseeing a range of tasks from project management to customer service and everything in between. The multitude of responsibilities for those at the helm of SMEs can be time-consuming and often overwhelming.
Restricted by a smaller workforce and tighter budgets, it becomes difficult to prioritise, delegate and pay due diligence to financial tasks within these small business structures. Furthermore, when it comes to accounting, business owners can feel intimidated due to the pivotal role it plays in the success or failure of the enterprise. However, research indicates that small companies can increase their chances of survival by 16% within the first year of business by simply applying good accounting practices such as keeping records of all financial transactions and information of the company.
Prioritise Your Accounts
Keeping accurate books is essential and as your business expands bookkeeping can become more complicated. It’s advisable to organise your finances from the start and keep orderly records of payments, invoices, taxes and payroll while your business grows. Moreover, keeping books together chronologically will help your business prepare for taxation before the end of the tax year and help prevent errors and irregularities.
Separate Your Accounts
SMEs are traditionally family businesses or solo endeavours, but it’s highly important for business owners to separate their personal and business finances as it makes it easier to differentiate. Furthermore, it’s sensible to create several different bank accounts for different areas of your business. For instance, a retailer may want to use one account for overheads like rent and utilities, and use a separate account for payroll. This way a business owner is able to get a clearer view of their expenditure and budget.
Monitor Your Expenses
It sounds like common sense but using a business account and saving receipts allows a business owner to monitor spending habits, highlight anomalies, track profits and expenditure. Understanding outgoings on a month-to-month basis can also help prevent late and unpaid bills which can ultimately impact a business’s cash flow. Moreover, receipts can also be used to reclaim VAT and income tax at the end of the financial year.
Evaluate Your Business Structure
It’s hugely beneficial to have a good understanding of your company, industry and sector so that you can identify which tools are best to invest in for carrying out your business activities. Determining factors such as growth rate, location and clientele can help you decide what works best for you and your company.
Plan for a Rainy Day
Unforeseen circumstances are just as much a part of business as they are life, therefore it’s best for small businesses to set capital aside for significant expenses that might arise as a result of upgrades, crises or expansion of your business.
Invest in Your Business
Finally, when your finances need extra attention it’s important that you entrust a professional to guide your business. Despite the initial cost, good accountants are able to work with SMEs to offer advice and ultimately save them money. A skilled pragmatist comes with expertise that a small business is not likely to have themselves including an in-depth knowledge of tax laws that could protect the business from fines and prosecution.
The deep knowledge base provided by Cottons Accountants can assist clients with their tax and accounting as well as business planning. Contact us today to find out about the high quality accounting services and packages we offer.