How to make accounting for small business ownerscan be learned step by step to make better business decisions. Through proper financial recording using accounting basics you learn, income, profit and loss, and debts and receivables can be known. Here’s how to do accounting even though the business is still small and growing.
How to Make Accounting for Small Business Owners Step by Step
Check Your Cash Position
Cash is something that needs to be considered because it’s an important factor that keeps your business running. Of course you don’t want to run out of money to the point where you can’t continue your business, right? Therefore, check your income and expenses carefully every month so that your finances are more under control.
Separate Personal and Business Finances
In accounting for even a small business, owners must learn how to separate personal money and business income. Start by creating separate bank accounts, one for personal and one for business purposes to keep them safe. Financial reports are guaranteed to be more accurate when you don’t try to mix personal and business expenses.
Record Each Transaction
Accounting in the small business world can be done by recording every transaction routinely to monitor the financial flow properly. The transactions include cash/digital receipts from customers, supplier payments, to customer billing, and others. Do it manually or use small business accounting software every day or week depending on the needs of each business.
Keep All Receipts
How to do small business accounting can be started by keeping all receipts and creating a vendor file. After sorting the file alphabetically so that you can access them easier, save all copies of invoices sent. All cash payments and receipts should be kept and have separate files for different receipts if there are less transactions.
Consider it as a practice to make accounting for your small business by putting all paper receipts in a box. It’s also an easier way to start sorting them out when doing your taxes, especially when having accounting software systems. With the help of the right accounting software systems, you can do paper receipts scanning making your work more efficient.
Make A Specific Folder for Unpaid Invoices from Suppliers
To keep your small business financially stable, be sure to record and review any unpaid invoices from suppliers. Create a folder specifically for this purpose and record each of your suppliers along with the amount paid. Make sure to include the invoice date and the payment due date; sometimes there are discounts offered for early payment.
Classify Transactions
Small businesses accounting basics also include how to classify every transaction and group them by account. You have to classify it by assets consisting of inventory, cash, and receivables along with liabilities or debts. There are also equity or capital and revenue expenses that you should also include in the classification.
Pay Suppliers on Time
After creating a folder for unpaid invoices from suppliers, do track your accounts payable and pay your suppliers promptly. Always pay on time to avoid late fees and maintain a good relationship with your suppliers. Sign checks after paying online or in person, keep copies of the invoices sent and received after that.
Send Invoices
When sending invoices, you need to include payment terms, which are usually due within 30 days (Net 30). Due dates are essential for accounting records to make it easier to estimate the month’s income of your business. Invoices usually contain your payment address, detailed costs, and other payment terms.
Make Sure No Missed Transactions
How to make accounting for small business owners guide also helps you to make sure there are no missed transactions. One way is reviewing your cash flow and managing it well, especially in the first year of your business journey. If you calculate and record all transactions correctly without missing anything, you can make better business decisions.
By having simple cash flow records showing your current cash position, you can manage your business better. In this way, you will also avoid business losses that have undetected causes because you’ve made good accounting for everything. You will also be able to spend cash wisely depending on current business needs each month.
How to make accounting for small business owners isn’t easy but it can be learned. Proper accounting helps you fulfill your tax obligations so that you’re not subject to sanctions from the government. In addition, financial records like this can also be used to measure business growth and performance.
