Most small businesses begin with very rudimentary accounting procedures, done on a do-it-yourself basis. Options run the gamut from paper records (yes, some people still use them) to simple spreadsheet programs to accounting software programs, like QuickBooks. As the business grows and its accounting needs expand, the amount of time and expense involved with keeping the books increases disproportionately. In any business situation, time is money; however, for your small business it is one of its most valuable resources – especially if it is your time.
Here are 5 ways to be cost-effective with your accounting:
1. Organize Your Files
The most time consuming, and potentially costly, aspect of business accounting is keeping track of all of the paperwork that flows in and out of the business on a daily basis. Sales invoices, purchase orders, billing statements, bank statements, cash receipts, payroll records, customer orders — the paper piles up very quickly. Without a system in place, the time spent organizing, compiling and reconciling for monthly, quarterly and annual financial statements will be costly — especially if the mess is turned over to a CPA or an accounting firm.
As part of your newly organized system, you need to make sure that you keep all personal finances separated from your business finances. Separate checking accounts and credit cards for business and personal accounts will save you a substantial amount of time in your recordkeeping.
2. Invest in Bookkeeping Software
For less than a hundred dollars, you can computerize most of your accounting procedures either through a software program or online. Most programs, such as QuickBooks, are easy to use and perform all the accounting tasks any small business would need.
Accounting software can manage your payroll and print out your quarterly and annual reports as well. Some programs will upload data directly from your checking and credit card accounts so manual data entry is reduced significantly.
3. Automate Payments
Many vendors and creditors allow for automatic monthly payments from your bank account or will charge your credit card. Payments to your health insurance provider, your utilities, and, in some cases your suppliers can be made automatically and, again, your accounting software will be able to import the transactions and categorize them. Saving time with payment of repetitive bills can be an efficient way to handle them.
4. Hire or Outsource Your Bookkeeping
One of the commandments of small business management is never do yourself what you can cost-effectively pay someone else to do for you. Because it will cost you less to have someone input, compile, reconcile and generate reports and handle payroll than if you were to do it yourself, hiring someone makes good business sense. Find a bookkeeper or bookkeeping firm that is experienced with the same bookkeeping software you use. Train them in how your business works before they start handling your bookkeeping. To do a good job, it is important that a bookkeeper understands how your business operates and what type of information you need regularly.
5. Hire a CPA
Yes, it sometimes it takes spending money to save money. If you don’t already have a CPA for handling your taxes, then hire one — preferably one who is referred to you by a trusted friend or colleague. CPAs, if utilized properly, can actually save you money, but you need to take the steps outlined here first. CPAs are expensive and you are wasting your money and their time when they are asked to do basic bookkeeping tasks such as, organizing your records, reconciling monthly statements or figuring out which costs to associate with which jobs or projects. If used for what they do best, which is to deal with taxes and tax planning, they are not only affordable, they are invaluable.