There are many reasons to start your own business.
From increased flexibility to more fulfilling work opportunities, it isn’t surprising that the number of self-employed workers goes up and up each year. However, while there are plenty of appealing factors involved in starting a company, there is one responsibility in particular that often has people feeling the pressure:
Accounting is an important part of owning a business and a legal obligation. All businesses are required to manage their money sufficiently to provide tax returns, although when it comes to success, good practice often means more than that.
Good accounting can support better decision-making and business growth. Bad financial management can leave you blind to danger until it’s too late. While that might sound daunting, setting your business on the right accounting path is very simple. All you have to do is follow these four easy steps:
Step One: Get Digital
Paper practices are problematic for good modern accountancy. Recording and storing data through paper entries is time-consuming and doesn’t support easy referral and access to financial information. Paper documents are also prone to get lost, which can result in inaccurate data.
It’s an old-fashioned way of doing things and should not be part of any modern business.
Going digital is the answer to all these problems. Digital accounting practices can be as simple as basic spreadsheets or as advanced as dedicated accounting software. The point of entry depends on your business needs. A micro-business, such as a local gardener, is unlikely to need dedicated accounting software. However, a larger retail business with a handful of employees should invest in a digital solution that offers more functionality.
Find the line that works for you.
Step Two: Get Recording
Having a digital solution to your accounting doesn’t mean anything if you don’t use it.
The next step to success is efficiently storing all of your business’s financial information. Record everything — every expense, every bit of revenue, every interest payment and every bill you pay. This advice might seem obvious, but there is a caveat to success here — you have to record all your information in a timely fashion.
It’s not uncommon for businesses to record their financial data in irregular patterns, potentially even waiting until tax season to file all their information. There a few issues with this:
- Delayed recording has the potential for financial data to be forgotten or missed
- Delayed recording means that between updates, your financial data is inaccurate
- Delayed recording means that at some point, you need to invest a lot of time in updates.
There is a straightforward solution to these problems. Assign a small amount of time every day or every week to recording your business transactions. Consistent and dedicated updates mean you never let your financial records fall behind, and accounting never becomes a task that consumes too much of your time — or interferes with other work responsibilities.
Step Three: Get Reporting
Accurate and easy-to-access financial data isn’t just going to make tax returns a breeze; this kind of knowledge can influence how your company develops. Up-to-date records allow you to produce reports on everything from general spending and revenue to details like costs of specific suppliers and the net income from individual products. Reports are powerful tools for understanding the financial health of your business and enable informed and smart decision-making as a result.
Think of reports as an overview of your whole financial picture. Seeing this picture lets you form strategy in a way you couldn’t without the information it provides. This sort of reporting can help you identify opportunities for growth — and potential downward trends — much earlier than you would without it.
Step Four: Get Help
More than 50% of businesses collapse within their first year. A report by Fortune.com found that 55% of failures cite some financial management difficulty as at least part of the reason for falling apart. In short, good money maintenance is key to success, and bad money maintenance is a one-way trip to failure.
What does this mean for a business? It means forgetting about the idea of toughing it out and trying to manage without help. If you are concerned about your business finances, expert advice is essential. Support from online accountants or local financial firms can be the difference between survival and bankruptcy. Even with better and more modern accountancy practices guiding you, sometimes nothing can replace the assistance of an expert.