If you’re like many small business owners and CEOs, more than likely you are a natural leader. Furthermore, you’re probably a skilled salesperson able to accurately assess the competitive landscape and focus on the overall big picture, which is crucial to achieving your short-term goals and contributing to the long-term success of your small business.
Where you most likely do not possess a deep skill set is — the accounting arena. Every small business benefits from the input of an accountant and the skills a professional bookkeeper offers — these contributions are just as crucial to the health and growth of your company.
So, even though you may not possess this skill set, there are plenty of professionals out there who can help. If and when you hire a small business accounting firm that offers outsourced services, there are a few key measures you should be aware of, so that, right from the start, your systems are set up to comply with applicable rules and accounting principles. This will contribute to greater accuracy and usefulness of your financial reporting, give your tax accountant what is needed for accurate tax planning, and avoid the “red flags” that can be the cause of an audit.
Accounting Measures All Companies Should Be Aware Of
1. Separate business and personal expenses.
Because it’s your money, you may reason, why should it matter if it is a business or personal expense paid for from my business checking account or credit card?
This is one of the most common mistakes made by small business CEOs and owners. It matters a great deal. There are many reasons, but one of the most important to know is that money spent in areas like gym memberships, gifts, charitable donations, and dry cleaning, among others may likely be considered personal expenditures and not be included in the company’s profit and loss statement as a deductible business expense.
As a small business owner, talk with your tax accountant to determine what is and what is not a deductible expense for your business and communicate that to your small business accountant or bookkeeper for proper recording.
2. Have your bookkeeper/accountant properly book your financial contributions to the company.
It is often the case, when just getting off the ground, that personal money is provided for various start-up expenses for the small business. Keep track of these, document them, and give the listing to your bookkeeper or small business accountant
Your accountant will take care to make an accurate entry into your books reflecting that you put money into the business and will attribute these to business expense or capital expenditures that will ensure that the company takes the proper deduction for these start-up costs. .
3. Set up and use accounting software.
If you want to do the books yourself at the start and are not ready to make the financial commitment to hire a bookkeeper or use outsourced services, at a minimum, invest the time and money to set up and use accounting software. It will help you ensure your records are as accurate as possible when the time comes to consider outside help.
4. Utilize professional services to set up your accounting software.
One of the biggest mis-statements out there when shopping for an accounting software package is the message put out by the manufacturer that it is easy to set up and use. We often see that small business owners who have set up the software themselves find, six months or so into using the system, that they are not getting any meaningful or useful reports from which to manage their business and all the system really does is act as a check writing and invoice producing system.
If there is one area where making a financial commitment to employing the services of a professional, it is in this area where a professional, walking you through the set up of your accounting software, will ensure things are proper from the start.
5. Consider getting training on the use of your accounting software.
If you are considering taking care of the books yourself, although you may resist the outlay of cash to make the commitment for professional training, consider a change in your point of view from this being an expenditure of cash — to an investment that will contribute to establishing a healthy base in the financial area of your company.
It will give you peace of mind right from the start, to know that your efforts are producing reports that will be useful in managing and running your business.
6. Watch the cost of your labor.
Labor costs are likely your most significant expense and it behooves the small business owner to monitor this area on a continual basis. Carefully review salaries and benefits to ensure you’re able to attract quality employees, but not needlessly overpay.
7. Plan and prepare for future major expenditures using an accurate Cash Flow forecast.
Computer hardware and software upgrades, building repairs, expanding your labor force – Use of an accurate cash flow forecast will assist in planning for these expenses in advance so that you can anticipate and plan for the appropriate cash requirements.
8. Know the importance of proper inventory management.
Your numbers can be adversely affected when theft and misplaced inventory goes unnoticed and not tracked on the books. Inventory modules are provided with almost all accounting software packages, but they are usually difficult to set up, learn how to use, and manage correctly. Consider engaging with a professional to assist in the set up and learning process with an inventory system.
Resolution Accounting Is Ready to Help
You might think you’re not ready to hire a professional small business accountant, but check out Resolution Accounting before you make a decision to do it yourself. Serving the entire Philadelphia region, including King of Prussia, Exton, the Main Line, Malvern, Chester County, Montgomery County, West Chester, and more, Resolution Accounting offers Philadelphia-area small businesses professional accounting and bookkeeping services.
It’s hard to put a price on your peace of mind. Resolution Accounting can help your small business set up your accounting system, provide training, and assist in managing your books to ensure the accuracy of your businesses record keeping.
Ready to start? Increase your peace of mind today, and contact Resolution Accounting—send us an email or call us now!