Hindsight is 20/20, so they say. Most small business owners can agree with that, particularly on the small business accounting front.
Ask any small business owner what they wish they knew about accounting before they started their venture and you’ll feel like a young swab hunkering down over beers with a grizzled sea captain eager to tell you tales too tall to be believed. But believe them! Especially if you’re thinking about starting a business of your own.
Knowing a thing or two about accounting before you go all-in on your own can be the difference between (moderately) smooth sailing and rough seas. (Editor’s note: Yes, we like sea analogies here on the Kashoo blog. We’re Pacific Northwesterners!)
Do Your Research
An ounce of sweat will save a litre of blood. There are local and federal requirements for operating a business and reporting income and you need to understand what those are.
If you do not understand them ask for help: there are plenty of great resources out there. A preliminary consult with an accountant or lawyer before setting up your business is invaluable and can save you lots of money and headaches down the road.
Have a Plan
Unless your business is accounting—in which case you shouldn’t even be reading this article—doing your books is no fun.
However, that doesn’t mean you can simply skip out on it. Ignore your books and you’ll be out of business in no time.
If your books are up-to-date, you already know so much about your business!
- You know who and what you owe.
- You know what cash you have in-hand.
- You know how much money is expected to come in and when.
- You know who owes you.
- You know (or at least have a good idea of) what your tax picture looks like.
Without clean books you cannot make informed decisions which means you are basically guessing and that is not a very good thing to do with your livelihood.
It’s no fun but who said every aspect of running your own business was fun?!?!
So for starters, set up a couple of recurring calendar items to remind you to do the work. Sunday afternoons are a great time for this.
Do Quarterly Reviews
Schedule a day every 3 months dedicated to looking at your numbers in depth. You can pair this financial review with a review of your analytics. (Not only is this pairing, but it evidences what is working for your business and what isn’t.)
The key to this quarterly review is dedication. Do not schedule anything else on these days.
Take the time to identify glaring issues and develop strategies to correct course. In fact, make it a requirement that on each of these days you identify 3 issues and potential corresponding solutions.
Maybe you’ll learn that you should change your payment terms. Or maybe you’ll find out that your long-term customers aren’t as profitable as your new ones. Then it’s up to you to figure out what to do about it.
Hire an Accountant
Your job as a business owner is to run your business, and part of that is keeping your financial data organized and coherent. However, you are not an accountant and nobody expects you to be.
Accountants know your local and federal tax regulations and are able to optimize your reporting to minimize your obligations which literally means more dollars in your pockets. Plus, when anxiety sets in (and it will… regularly) an accountant can be a tremendous source of comfort and reassurance. Seriously!
And Finally… Have Fun!
When you are the boss the buck starts and stops with you. That is both a blessing and a curse.
So every once in a while, remind yourself why you got into business for yourself in the first place.
- Look out your window.
- Call your significant other.
- Pull up a picture of your kids on your iPad.
- Think of all the great things you’re going to do.
- Think of the great people that perhaps work for you.
While we can’t speak for everyone, chances are you’re in it to win it on your own because of one (or many) of those reasons.
So young swab, take these small business accounting lessons to heart and you’ll have soft seas and fair breeze.
This blog post originally appeared at kashoo.com on February 11, 2014.
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