As a small business owner, accounting isn’t usually your idea of a fun time. But it's necessary for keeping the doors open - and a task you'll be thankful you spent time on when tax season rolls around.
At Little Fish Accounting, we encourage business owners to do a bit of accounting work on an ongoing basis rather than waiting until the end of the year. This brings incredible benefits to the day-to-day of your business and keeps you on track for tax season year-round.
How You Can Benefit from Focusing on Accounting Year Round
Running a business is challenging. It requires making tough decisions and without good accounting, you will be adding another layer of complexity to your day-to-day tasks.
While taking time to focus on your accounting may seem like a burden in the present, the long-term benefits are abundant.
For one, you'll have better records of your business activity and expenses. This provides a clearer picture of how your business is performing and helps you identify what’s going well and where there are areas for improvement. As you plot your future growth, you can confidently rely on up-to-date numbers to make more accurate financial projections. You'll also be thankful when tax season arrives, as you'll have detailed records of expenses that qualify as deductions or credits that can lower your tax bill.
There's a real impact on your day-to-day finances, too! Focusing on accounting can help improve cash flow in several ways, from making sure you’re getting paid on time for outstanding invoices to understanding where you have available cash that could be better used in other areas of the business.
Spending time on your accounting throughout the year is one of the best ways to create financial clarity and increase the efficiency of your business!
5 Tips for Making Your Accounting Work for You Year Round
If you're intimidated by accounting or feel like you’re too busy, it can be tough to even think about handling the basics.
Fortunately, there are some practices you can put into place to make your accounting work for you and your business year-round.
1. Realize Accounting is More Than Compliance
Accounting isn't just about obeying the rules and keeping the tax man and regulators happy. It's also one of the best ways to access and evaluate valuable information that can help you run your business more effectively.
Understanding this is the first step to taking advantage of the essential data that's been there all along, waiting for you to unlock.
By making accounting a year-round focus, you can more clearly see patterns and seasonal trends, as well as identify new ways to save and maximize the funds within your business.
2. Rely on Automation
Automation has changed the way businesses manage their accounting.
With an automated accounting system, your business can track and analyze financial transactions, such as purchases, sales, and payments. It can also be used to track accounts receivable, accounts payable, inventory, payroll, and other financial activities. Accounting systems are designed to ensure accuracy and provide insights into the financial health of your business. Think of automation as an additional employee who can handle those pesky ongoing, repetitive, and time-consuming tasks that take you away from running the business.
The right accounting systems are easier to set up than ever before, and with recent improvements in AI, they will only become more powerful. They will free you up from day-to-day financial and accounting work to focus on the big picture and give you more time to do the things you love within your business.
Accounting software will also automatically generate reports and provide data dashboards that put the information you need to make informed decisions at your fingertips.
This effortless organization takes the guesswork out of how your business is performing, equipping you with the information you need to feel empowered to make strategic decisions for your business.
At Little Fish Accounting, we recommend QuickBooks Online. By using our referral link, you can receive 30% off your first six months.
3. Stick to Your Budget
The information from keeping up with your accounting practices sets you up perfectly for creating the perfect budget for your business.
Use past data to plan out anticipated expenses and income to build a strategic budget that you can track against throughout the year.
Then, stick to it!
Sticking to a well-crafted budget will:
Guide your spending
Improve cash flow
Following a budget may sound like a simple strategy, but if you push your budget to the side, other areas of your accounting system can feel the repercussions.
Think of your budget as a roadmap of your business’s financial goals, objectives, and strategies. It helps you accurately track and report performance and results. With a budget in place, you can see a clear and accurate picture of the business’s finances and identify areas of potential savings or areas where additional resources may need to be allocated.
4. Create Daily, Weekly, Bi-Weekly, Monthly, Quarterly, and Annual Checklists
Some business owners may feel overwhelmed by the different tasks required to keep their financial data up-to-date. The easiest way to deal with this is through the use of checklists. By splitting up the work into daily, weekly, bi-weekly, monthly, quarterly, or yearly categories, you can make checklists that are straightforward and easy to tend to on a regular basis.
Daily activities include:
Check cash balance and reconcile any cash payments received from the previous day.
Deposit checks and cash received.
Plan the next day.
On a weekly basis, businesses should:
Record and categorize the week's activities in your accounting system. If you are using a cloud accounting system, pay special attention to transactions that were not paid through connected accounts, and personal transactions if applicable.
Send reminders for overdue invoices.
Check on the status of invoices. Prepare and send as needed.
On a bi-weekly basis, you should:
Document and file receipts. Save in the cloud storage application of your choice, and use a categorizing and naming convention that would allow you to identify easily if needed.
Review unpaid bills from vendors.
Track and categorize mileage as business or personal (if driving is applicable to your business).
On a monthly basis, you should:
Reconcile bank and credit card accounts in your accounting system.
Review financial reports (i.e. balance sheet, profit and loss). Identify trends in key accounts.
Review aged receivables to get an overview of all outstanding customer payments.
On a quarterly basis, you should:
Pay the appropriate estimated income taxes.
Review quarterly financial reports. Assess numbers v. prior periods and determine whether any strategic changes should be made in your business.
Meet with your accountant to discuss any questions that you have, as well as tax planning for the year.
File payroll tax and sales tax payments (as applicable).
Review inactive clients in your system to clear them out of the leads queue.
On an annual basis, you should:
Review your financials for the year to ensure that all transactions are properly categorized. Prepare final full-year financial statements.
Review inventory and update balances as needed in the accounting system.
Assess offerings and current client base to determine whether any changes need to be made.
Prepare and file 1099-MISC (contractors) and W-2 (employees) documents by the deadline.
File the appropriate tax returns for your business type and pay your taxes!
5. Work With a Trusted Accounting Partner
There's no getting around the importance of accounting. But it's not always the best use of a business owner's time and energy.
That's where trusted accounting partners like Little Fish Accounting come in that go beyond completing tasks and focus on the growth and sustainability of your business. We'll help set up the perfect accounting systems and financial plan for your business. But it doesn’t stop there, we’ll meet with you throughout the year to check in and offer our expert guidance to make sure you’re always on track to meet your goals.
Whether you're hoping to keep your small business small, planning for growth, or just want to put together a strong tax plan, Little Fish Accounting will be there for you.
To learn more about how we can help your business, visit our services page!