- Budget Conservatively
- Do Not Forget About Quarterly Taxes
- Use Only One Financial System
- Have a Go-To Accountant
- Do Not Mix Professional and Personal Expenditures
When it comes to accounting tips for entrepreneurs, the list could probably spread over dozens of pages. After all, in terms of successful business ventures, not too many experts are as specialized as the CPAs. So, what would be five of the most important pieces of advice?
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1. Budget Conservatively
In order to carry on a lucrative operation, knowing how to predict expenditures is vital. The reason why is that it will allow one to properly allocate their revenues between variable and fixed costs. Not to mention that it should help with profitability analyses and other calculations that showcase the effectiveness of the company. Well, something that every accountant learns very early in their academic career is the concept of “conservatism.” It translates to the need to always estimate numbers on the low-end of the spectrum. For instance, forecasting revenues as low as possible will facilitate a good safety margin.
2. Do Not Forget About Quarterly Taxes
According to Forbes, small businesses employ over half of the entire workforce in the U.S. In addition, over 540,000 such ventures get started every single month while even more than that cease operations. Given how sole proprietorships are the most common entity type, it is important for all those involved in this market to remember their quarterly taxes. The U.S. mandates that sole-proprietors pay the self-employment tax or 15.3 percent of their profits. The government further requires the funds to be sent evenly throughout the year. Hence why everyone should have a reminder for those four deadlines in April, June, September, and January of the subsequent period.
3. Use Only One Financial System
Keeping track of income and expenses is going to be extremely hard when the organization uses multiple softwares. For example, if Quickbooks is used for all expenses while each cash inflow gets recorded in Excel, the final analysis will be very hard to do. The easiest way to sidestep this problem is to simply choose one system where everything will go. The aforementioned two options are both outstanding as they allow easy computations and effortless data entry that can even be copied from other sources. Regardless of the software, spending enough time to learn how to properly use it is certainly important.
4. Have a Go-To Accountant
Obviously, any list that contains accounting tips for entrepreneurs would be incomplete if it does not advise everyone to get their own accountant. Whether it is taxes, business plans, unusual transactions, or journal entries, there will be something that the company may need an accountant to help with every day. If hiring one on a full-time basis is not feasible, the next best scenario is to put a CPA on a low-cost retainer where they will remain accessible during fixed daily or weekly hours. Once their expertise becomes readily available, inquiries such as the aforementioned will never present a problem.
5. Do Not Mix Professional and Personal Expenditures
Finally, every single accountant that has tax experience with clients who do not separate expenditures will advise against such a practice. This takes place when a person uses the same payment method for both personal and business costs. So, they may be utilizing a personal credit card to order company supplies as well as cover their date-night dinner. While it may not seem overly serious at first, it can turn the tax-filing process into a nightmare. Why? Because transactions will have to be reviewed on a case-by-case basis and countless hours will be wasted.
Many of the ideas mentioned here come naturally to seasoned veterans who have been running their brands for a while. Those who might just be entering the industry, however, should most definitely look at each of the said accounting tips for entrepreneurs carefully.