Your online small business selling gourmet coffee is booming. Thanks to your coffee club memberships, sales have doubled in the past year. You’re a little high on this success – but office work is falling by the wayside. Your desk is overloaded with sales invoices and receipts. You haven’t checked your company’s accounts and bank statements in three months. It’s time to get serious about your bookkeeping and accounting. The following accounting tips will help you do just that.
What is accounting?
Accounting is the process of collecting and recording a company’s financial data. As part of your accounting, you analyze the financial health of your company, track operations, and make decisions about whether to expand, switzerland email list hire employees, reinvest profits, take out loans, or seek investors.
Accounting provides a large part of the material for this. This is where you collect invoices, the trough or low in the height receipts, pay slips and tax payments. You also record all your financial data in these documents. Precise and up-to-date accounting increases the chances of success for a small business.
10 Accounting Tips for Small Businesses
Advice for your e-commerce accounting as a small business owner could fill an entire book. The following accounting tips are a good place to start.
- Separate business and private expenses
- Use accounting software
- Create a budget
- Keep detailed records
- Understand the sales tax laws
- Manage your cash flow
- Stay organized and clean up your accounting
- Choose an accounting method
- Automate invoicing
- Plan ahead for taxes and meet deadlines
1. Separate business and private expenses
Set up a separate business account to avoid mixing personal funds and business transactions. This makes it easier for you to collect and review business expenses for tax deductions. Separating your business funds also helps limit sole proprietors ‘ potential legal liability for business debts.
Be careful not to use your personal credit card for business expenses. Get a business credit card instead. This type of credit card can help you bridge temporary cash flow shortfalls and build business credit, colombia business directory while ensuring that your personal credit score is not affected by your company’s finances.
2. Use accounting software
Proper tracking of income and expenses is essential to good accounting. Bookkeeping and accounting software can automate many time-consuming and tedious manual tasks, such as sending and tracking customer invoices, sorting expenses, and paying employees. Software also helps reduce human error.
3. Create a budget
Small business owners should always create a budget for their expected income and expenses and regularly compare it with actual results. Budgeting helps small businesses analyze their operations and improve cost efficiency, as well as find possible expansion opportunities.
As you can see, it is important to create a budget. Companies that do this generally report better financial results. Companies without a budget may not recognize a problem until a liquidity shortage occurs. But by then, in the worst case, it may already be too late to prevent major damage to the company.
4. Keep detailed records
Accuracy in your records increases a small business’s chances of success. Records are also crucial at tax time, when you need to document all tax-deductible expenses. IRS rules require businesses to keep records for between 6 and 10 years .
As a first step, you can create folders for paper receipts by expense type, vendor, or supplier. More and more accounting software services also allow users to electronically scan receipts using mobile devices and then sort and categorize them in the online accounting system.
5. Understand the sales tax laws
As an entrepreneur, you need to know the sales tax laws in the countries in which you operate or sell. If you only trade in Germany, the German regulations apply to you. However, if you also have business relationships with customers or suppliers in other EU countries or outside the European Union, you should also inform yourself about topics such as the reverse charge procedure.
Generally, if a business has a physical presence in a country – a store, office or warehouse – it must collect VAT there as well. Online retailers that operate in multiple countries may also need to collect or remit VAT there. The answer to this question also depends on whether they sell directly or through a fulfillment service like Amazon, which may add VAT itself.
Small business owners, especially e-commerce businesses, that operate in many countries should consult professional accountants or tax advisors to set up accounting that complies with local laws.
