Small businesses are the backbone of the Australian economy. Over 2.5 million businesses (97.3% of all businesses in Australia) are small businesses. They create jobs, drive innovation, and contribute to the community.
But running a small business can be tough. There are many things to juggle, from marketing and sales to customer service and operations. And on top of it all, you need to manage your finances effectively.
Effective small business accounting is crucial for the success of any small business. It helps you make informed strategic business decisions, track your progress, and maximise the financial rewards. But with so much on your plate, it can be hard to know where to start.
Here are 10 top tips for small business accounting:
1. Structure your business effectively
While many businesses start by using a sole trader structure, they will typically outgrow this structure as they mature. Operating as a Pty Ltd company or trust will minimise tax and protect the business owner from liability. It will also enable the business to keep personal and business finances separate, making it easier to track business expenses and income.
2. Create a budget and stick to it
A budget is a blueprint for your business’s financial position. It helps you track your income and expenses, and establish spending targets. When used correctly it will ensure you’re not spending more than you earn. There are many different budgeting methods available, so find one that works best for you.
3. Track your cash flow regularly
Cash flow is critical for any business. Without enough cash to keep the wheels turning, everything can fall apart. It’s important to track your cash flow regularly to ensure you have enough money to meet your obligations to staff and suppliers.
4. Review financial reports and data
Financial reports provide you with a snapshot of your business’s financial health. By capturing and analysing various data points they can help you identify trends, make informed decisions, and track your progress towards your goals. Key financial reports will include your balance sheet, profit and loss statement, budget, cash flow reports and more.
5. Forecast your future financial position
Forecasting your future financial needs can help you prepare for upcoming expenses and make sure that you have the funds available. Forecasting involves predicting future sales and expenses based on previous results and other factors. There are many different forecasting methods available, so find one that works best for your business.
6. Keep your records organised and up-to-date
It’s important to keep your records organised and up-to-date. This will make it easier to find the information you need when you need it, and it will also make it easier to prepare your taxes. It’s also important from a compliance point of view, especially should you ever face an audit.
7. Use cloud accounting software
Cloud accounting software is a great way to save time and money on your accounting. It allows you to access your financial data from anywhere, and it can automate many of your accounting tasks such as generating invoices, sending reminders, and reconciling bank accounts. This can free up your time so you can focus on other aspects of your business.
8. Streamline your accounts payable and receivable processes
The accounts payable process is the process of paying your bills and the accounts receivable process is the process of getting paid. It is important to streamline both processes to create efficiencies and free up cash flow. This may include negotiating better terms with suppliers or systemising the process of paying bills so you have access to your cash for longer, through to creating invoice follow-up processes and reducing payment terms to help you get paid sooner.
9. Stay compliant with BAS and tax obligations
As a small business owner, you are responsible for complying with several tax obligations including lodging Business Activity Statements (BAS), PAYG withholding, company tax, payroll tax and more. It is important to stay up-to-date on the latest regulations and remain compliant to avoid penalties and interest charges.
10. Seek professional advice when needed
If you are feeling overwhelmed by your small business accounting obligations, it is important to seek professional advice. A qualified accountant can help you set up your accounting system, prepare financial statements, and help you make sound financial decisions.
By following these tips, you can manage your finances more effectively and help your small business succeed.
Looking to engage an accounting firm for your small business accounting? We can help. Keeping Company is an award-winning accounting and bookkeeping firm. Contact us today to find out more.
At Keeping Company, we’re not just accountants, we’re business people too. With our counsel, your business can reach its full potential.
We have a team of experts; Cloud Accountants, Business Advisors, Finance Specialists working together and ready to help, contact us today.
For all media enquires please contact Tracy Miller, CMO, Keeping Company 0414 898 452.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.