7 Essential Tips for Keeping Track of Your Small Business Finances
Dan Levenson January 03, 2017
Managing money can seem tedious for some business owners, but keeping track of your small business finances is crucial for maximizing profits and getting every possible tax benefit.
Keeping track of all expenses and receipts gives you a big advantage when adding up costs and deductions, plus it keeps your business running more efficiently.
Here are some tips you can use in 2017 to keep your small business finances in order and on the path toward growth and improvement.
1. Keep personal and business accounts separate.
If you try to use the same checking account for business and personal transactions, things can become very complicated, which can lead to costly errors. This tends to take a toll on your profit margin, and it can also get you into hot water with the IRS.
Not only should you have a separate checking account for your business finances, but it’s also helpful to have a separate credit card for business purchases. Using separate credit cards for business and personal purchases makes it easier to track your finances and it also helps organize receipts and expense records for tax filing.
2. Put it on the weekly to-do list.
Make sure you set aside at least one time slot every week—even if it’s only 15 minutes—to manage and organize your financial records. Even though there are many other things that may seem more important at the time, make this activity the first priority on your schedule for that day.
Every week, you should gather records of purchases such as receipts, cancelled checks, and bills. For a company vehicle, you can keep a log that tracks trips and gas expenditures. Enter all purchases and expenditures into your accounting software. This doesn’t take long and it will keep your stress level down throughout the year and especially during tax time.
3. Labor is probably your most important cost.
Labor should be a primary focus for controlling costs, as it tends to be the greatest expenditure of most small businesses. Make sure you not only track wages, but also factor in benefits, overtime, and other labor costs.
By being aware of these numbers, you may realize that your labor costs are too high for your budget, or the opposite may be true; you may have extra cash flow to offer perks to your employees, which will better incentivize them.
4. Make sure your accounts are being paid.
It may seem like an obvious part of doing business, but many small businesses fail to keep thorough records of their customer accounts. Without an organized system that tracks invoices and payments, it may be months before you realize you have overdue payments.
Also, letting accounts slide too long may result in no payment at all in some cases. A good record system will track due dates, how long customers take to pay, and which customers have been difficult in the past.
5. Accounting programs can help identify deductible expenses.
Some small business accounting applications provide a “chart of accounts” that highlights business expenses that are deductible. Such allowable business expenses could include using a company car, home office, meals, and travel. To be in accordance with tax laws, make sure that the primary use of these expenses is for business.
6. Let a professional handle it.
For as long as people have bought and sold goods, business owners have employed accountants to help manage their cash flow. Their expertise with business finances and tax laws will help increase your profits and prevent problems with the IRS.
It may seem cheaper to do your own accounting and tax preparation, but for most businesses, this usually ends up costing more in the end. Accountants can find more tax deductions and keep you from suffering penalties.
7. Don’t forget about insurance costs.
Another important factor in keeping track of your business finances is to regularly check that you’re getting the best prices for your business insurance. To get the best benefits and insurance coverage, it’s wise to seek advice from experienced professionals.
Contact us to find out how our team of insurance experts can enhance your business and save you money.