When starting or maintaining a small business, your business finances are essential to ensure smooth financial operations. To do this, your business accounting and bookkeeping practices must be reliable and accurate. A business owner should take steps when contemplating the business’s financial needs alongside personal financial needs.
Accounting and bookkeeping are essential tools for keeping business finances in order, but first, there are other issues you need to address as a business owner. One of the most important first steps to your business’s financial stability is to separate your finances from your business finances. It is a common and understandable mistake for the business owner to co-mingle their personal and business finances. While when you are first starting your business, combining the finances may not be significant. Once a business starts growing, separating business and personal finances should be a priority.
Once your business and personal finances are separated, there are other steps to keep your business finances in order. Here are five accounting tips to get and keep your business finances in order.
Focus on Accounting and Bookkeeping
Whether your business is large or small, accounting and bookkeeping is an essential focus for your business. Larger businesses may need an entire accounting and bookkeeping department, while a small business may use accounting and bookkeeping software to keep up with the business finances. All businesses of any size have in common that they need to focus on the business’s accounting and bookkeeping. This focus will ensure that your business finances are organized and easily kept in control.
Fixed and Variable Expenses
Fixed and variable expenses exist in any business. Fixed expenses are those business expenses that are the same and expected every month. These expenses could be rent or mortgage, utilities, or long-term loan payments. Variable expenses are those expenditures that vary monthly. They can be recurring but vary in amount or when they are due. Variable expenses include production supplies or materials, salary payouts, and commissions, or various fees. To keep your business finances in order knowing what these expenses are and the differences will help in your business accounting.
Billing Strategy
A common issue in businesses of all sizes is billing challenges. While large businesses can cover the deficits they may suffer because of billing issues, invoices not being paid can deeply impact small businesses. No matter the billing issue’s size or depth, a business must come up with a billing strategy. There are a few ways you can structure billing to maximize your accounts receivable and company bottom line.
- Shorter Payment Window
- Early Payment Incentives
- Discounts for Full Payments Upfront
- Automated Payments
Bookkeeping Strategy
Whether using a professional bookkeeper or using bookkeeping software, you must keep on top of your books daily, weekly, or monthly. If you only concern yourself with your books and business finances sporadically, you may not be prepared to handle them properly if there are financial issues. If you are keeping up with what is in your books regularly, there should be no surprises in business finances or accounting issues. If you are handling your business’s accounting or bookkeeping yourself, make all entries immediately to ensure nothing gets missed. It is vital that your bookkeeping be a priority.
Practice Good Financial Habits
As with personal finances, business finances require you to have good financial habits. Being aware of your books and bookkeeping practices is just one aspect of your business finances. You need a budget and to stick to the budget just as you do in your household. Every expense should be accounted for to be aware of areas where you need to improve your financial habits.
Conclusion
Keeping your business finances in order is easy if you follow a few steps. Separating your personal and business finances, having billing and bookkeeping strategies, understanding essential aspects of accounting and bookkeeping, and practicing good financial habits will ensure your business finances will stay organized and in order and never out of hand.
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