What’s your accounting strategy? Do you even have one? Is it, “cross your fingers and hope for the best”? Not a good idea. Once your business has grown enough that you’re renting office space, it’s time to get serious about accounting.
Actually, the time to get serious about accounting was when you first dipped your toe into the pool of entrepreneurship, but if you didn’t, it’s not too late.
Let’s start with the assumption that businesspeople have varying levels of interest in getting involved in their own accounting. Many who start businesses are creative types, and dealing with numbers can cause panic, depending on your personality. So you likely fall into a range of what you can and can't (and will and won't) handle accounting-wise.
Involvement Level: 1-3 (email accountant only at tax time, wait for returns to come back, sign without reading, forget to mail, etc.)
The people in this group are on the lowest rung of involvement. But make no mistake, as a business owner, you have to have some involvement. At the very least, you need to keep track of a few important things so that your accountant doesn’t cry when it’s time to do your taxes. These include:
Keep good records of your expenses throughout the year and the accompanying receipts.
If you have a lot of business expenses, it’s probably worth it to invest in some software to track them. It can make the job infinitely easier.
Stay on top of financial statements month-to-month.
Your previous year’s tax returns will help you manage your business in the current year. They will tell you what your quarterly estimated payments should be as well as other important information. Bring your tax returns from the previous year to your meeting with your accountant for the current year if you have changed firms.
Involvement Level: 4-7 (actually read credit card statements every month, order supplies before they run out, etc.)
Maybe you like saving money more than the average Joe. Maybe you have always found business accounting fascinating. Maybe you’re some kind of control freak. Regardless, you may want to have more of a hand in your business's day-to-day accounting than others.
People in this group will want to get accounting software and start tracking and managing right off the bat. Accounting software can seem overwhelming to some, but others enjoy it and find it easy.
PC Magazine has rated the top small-business accounting software to help you choose. If you have never heard of PC Magazine, maybe start with simple software that does not have too many bells and whistles.
Involvement Level 8-10 (tally profits and losses at the end of each day, check business plan to see if on track, back up files in three places, etc.)
The people in this group are sometimes accountants. Others are actuaries. They love carrying the 1, making projections with charts and graphs and planning carefully.
If you aspire to reach this level, plan time each day to update all your accounts, then actually do it. Automate what you can and keep a close eye on the tasks you can’t automate. Study the best way to invoice for your business and put a plan in place to get payments from delinquent clients. You can’t make money if customers aren’t paying.
Carefully compare income to projections to see if you are on target, and if you aren’t, make a plan to try to boost sales or scale back expenses.
Consider meeting with an accountant to get advice about how to proceed and whether you are truly equipped to do so.
Outsourcing Is an Option
Depending on how large your business is, bookkeeping can be a full-time job, especially if you have employees and need to send in payroll taxes. There are penalties for failure to pay these taxes or failure to pay them correctly.
Thus, if you don’t have the time or think you may not be up to the task of doing your own accounting, don’t hesitate to hand the job over to a professional. It could save you money in the long run.
Did you know that you can deduct the cost of office space on your taxes? Consider renting temporary office space from Premier Workspaces. You can rent by the month, week, day, or even hour. Learn more about Premier's office space products and services that are ideal for a small-business owner. Schedule a tour of a Premier Workspace today.