Practice Panda | 7 Tips for Small Business Accounting Success
Practice Panda | 7 Tips for Small Business Accounting Success
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Practice Panda | 7 Tips for Small Business Accounting Success

7 Tips for Small Business Accounting Success 

Keeping your company books in order can be a challenge. The following tips, though, can help set your accounting system up for success. 

  • Separate business expenses from personal expenses. Keeping your business expenses separate gives the IRS one less reason to deny legitimate business expenses, as the IRS is quick to toss valid tax deductions if personal expenses are co-mingled in your business account. 
  • Keep your books current. Setting a goal of having all business transactions recorded by the end of every week can help you accurately record on a timely basis. It is also easier to record one week of transactions at a time, rather than waiting until you have one month’s worth (or more!) of transactions to record. 
  • Accurately record capital assets. Because capital assets provide long-term value, they are entered on the balance sheet and depreciated over multiple years. So it is important to understand when a purchase is a capitalized item and record it properly. In addition, you will need to keep a copy of the invoice available for the life of the asset to help prove a gain or loss when you sell or dispose of it. Consider reviewing large purchases once a month to ensure that a capital asset wasn’t accidentally recorded as an expense and keep a file of the invoice and asset id. 
  • Perform monthly reconciliations. When you receive your monthly bank statements, ensure they are reconciled to your books within one week, as reconciliations often identify inaccurate transactions. Performing timely reconciliations can help you identify anything that may be amiss as soon as possible. 
  • Accurately record sales taxes. Sales tax that your business receives when a customer makes a purchase is recorded as a liability since it is the state’s money, not yours. Conversely, sales tax that your business pays when making a purchase is booked as an expense. 
  • Save proper documentation. In addition to saving invoices and receipts for sales and purchases, also save documentation that supports all adjustments or journal entries recorded in your accounting system. 
  • Delegate your accounting tasks. Many entrepreneurs start their business for reasons other than spending hours working on their books. So ask for help. Partnering with an expert to handle your bookkeeping needs can free you up to use your expertise where it’s needed the most — running and growing your business. 

 

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