7.
Having organized accounting and financial management means less time spent looking for records instead of building the business. They also make analysis and decision making easier for the company when it is considering expansion or hiring.
8. Choose an accounting method
A small business must choose one of two accounting methods: cash accounting or accrual accounting.
Cash accounting is often simpler for a startup or small business: sales and expenses are recorded only at the time of payment.
Accrual accounting is more complicated. A sale or expense is recorded at the time it is incurred, although payments may not be made until weeks or months later. The accrual method involves a long-term view of the business across multiple periods, and is the standard among larger companies and financial institutions.
Accounting standards are also important. Publicly traded companies in the United States and Canada must use a set of rules called generally accepted accounting principles (GAAP). While private companies do not have to adhere to these rules, they can be helpful in communicating with accountants and managers.
The rules are overseen and enforced by government canadian email addresses regulators. Almost all other developed countries use International Financial Reporting Standards (IFRS). Unlike GAAP, IFRS are guidelines, recommended but not mandated. China and India, among other countries, do not adhere to IFRS.
9. Automate billing
Sending invoices automatically can streamline your invoicing and save time and resources. For example, you could set up invoicing software to automatically send invoices within 48 hours of a sale, followed by scheduled payment reminders and overdue notices if necessary.
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10. Plan your taxes ahead of time and respect deadlines
A small business should estimate the income taxes it will have to pay during the year based on its growth and projected gross revenue. Small businesses, including e-commerce businesses, typically have to make quarterly or monthly payments. Late filing or payment could result in penalties and interest charges.
Frequently Asked Questions About Accounting Tips
How can I comply with VAT laws?
You should make sure you are aware of the VAT laws in your country and in the countries you sell in. You can also use specialized VAT collection software for small businesses, especially for ecommerce businesses that sell in many countries.
How can I manage cash flow?
Some ways to manage and improve cash flow include:
Consistency. Review and analyze expenses weekly.
Synchronization. Synchronize expense payments with client payments.
Incentives: Offer customers who pay quickly a discount or, in the case of subscription sales, the first month free.
How often should I reconcile my bank account?
Reconciling involves aligning your business records with your bank account. Doing this at least once a month makes sense because monthly bank statements help in the reconciliation process. Reconciliation allows you to verify cash flow, detect discrepancies or missing funds, and prevent fraud.
What are some common tax deductions for small business owners?
Many expenses can be deducted depending on the circumstances of your business. Some common deductions include office rent, the purchase of computers, software or office supplies, your business's telephone and internet bills, vehicle mileage and other expenses related to business travel and business trips.
Do I need to hire an accountant or manager for my small business?
Small business owners can often handle accounting and financial management on their own, depending on the simplicity and size of the business. However, larger and more complex businesses almost always need to hire professional accountants or managers.