11 Top Accounting Tips for New Entrepreneurs

By Charmaine Senneville

new entrepreneurs
Photo by Pixabay on Pexels.com

As new entrepreneurs, your main focus is the product or service you’re selling. You want to do what you know best. But, it is essential you do not ignore other important matters like finance and accounting. You must know about accounting as well to ensure your business runs efficiently. Accounting helps you manage finances and create the best plans for your enterprise. 

One of the most important aspects is monitoring your accounts receivable to ensure your cash flow is healthy. And user-friendly software for accounts receivable is a major help in this task. 

Keep reading to get to know the whole 11 tips. 

1. Monitor the Accounts Receivables

Your enterprise’s sustainability depends on your accounts receivable. You must check in with your customers to ensure they are paying their invoices on time if you want the money to keep coming in.

You need to own efficient software for accounts receivable and have a solid internal structure to get paid on time. With accounts receivable software, you can keep track of, monitor, and receive regular reminders about outstanding payments.

Accounting software can help you track outstanding invoices, send automated customer reminders, and even provide a cash flow forecast. It will allow you to keep track of all incoming payments while also helping you reach out to clients who still need to pay their bills. 

The software eliminates the hassle of manually collecting money from customers and ensures your enterprise receives payment for services rendered.

2. Keep Your Personal and Business Accounts Separate

To keep your business running smoothly, organization is key. You don’t want to check every item of your records just to find a certain business transaction.  Even if you are initially financing your company with your own money, it’s important to keep everything separate and adequately recorded.

Separating your accounts reduces tension and confusion when it comes to paying taxes, maintains all the records easily auditable, and provides personal legal cover by keeping personal and business funds apart. The separation also allows your company to use a line of credit to fill in any financial shortfalls.

3. Keep Every Receipt You Receive

Receipts are the key to financially sustaining your business. Ensure you keep every receipt for anything purchased or received in your enterprise.

Every receipt from a cash register or credit card bill will allow you to give a credit rating to your company and establish accurate financial records. Receipts can also be used as evidence in court or with an accountant when client disputes arise.

4. Maintain the Accuracy of the Financial Books

Owners and staff can only get a good view of the business’s financial situation if they keep the financial accounts up to date. Automating the receipt and invoice ensures the books are constantly up to date. 

Integrate your accounting software to bank accounts. The software lets you download and manually import bank and credit card statements. Accounting software has a plug-in that automatically retrieves daily bank transactions, statement files, and information from your bank account.

The business’s ability to define the matching rules in its system simplifies reconciling the statements. A business owner can manage and execute all bank transactions in the accounting system using accounting software that allows direct coordination with bank accounts.

5. Purchase Accounting Software

Automate manual procedures and processes to streamline business finances and save time and money. Using affordable accounting software that meets your company’s demands is one of the simplest ways to do this.

Choose from a comprehensive range of virtualized accounting project management tools that organize your bookkeeping, simplify cash flows, and keep you up to speed with your money. Several project management tools for accounting have simple, intuitive user interfaces that are ideal for business owners without a background in technology.

Accounting software generates financial reports instantly, reduces paperwork, saves time and money, simplifies payroll, and provides correct data. With software, you can quickly produce invoices and simplify tax compliance.

6. Hire an Accountant

A business cannot operate without an accountant, especially when there is likely to be regulatory pressure. Hiring an accountant is an excellent investment to ensure your business runs efficiently and pays its dues. You don’t want to try to do everything yourself, even if you are a self-starter.

You must work with an accountant about the process and ensure your records are in perfect order before your accountant can complete your taxes. An accountant will know how to keep personal purchases separated from company transactions and maintain proper financial records.

7. Set a Budget

Creating a budget is one of the most important stages of a new business. It’s where you define what you expect to earn and what you expect to spend.  

A budget lets you be proactive about saving and spending money to keep track of your earnings and avoid financial problems. It also helps you plan and keeps your company on track regarding paying taxes and following legal requirements.

8. Generate Profit and Loss Statements

A profit and loss statement (P&L) is the cornerstone of creating a financial forecast and understanding the health of your business. You’ll be able to determine where you stand financially with this document and use it for future planning.

The statement must include your operating profit, gross profit, and net profit. The details make it much simpler to demonstrate revenues, expenses, and your organization’s profit, typically over the past year.

You should have an accountant look over your numbers, and if there are any discrepancies, ensure they get appropriately addressed.

9. Take Advantage of AP Terms and Invoicing

Take advantage of the credit terms offered by important suppliers to keep your cash longer. Maintain a payment plan that optimizes your liquidity, and pay your invoices early with suppliers who give you a discount whenever it’s practical. 

Make every effort to encourage clients to make on-time payments to maintain a continuous cash flow. Ensure timely payment by giving discounts to clients who make prompt payments, checking potential clients’ credit before trading, and cancelling credit arrangements. 

Accounting software that automates the process of issuing invoices and follow-up notices could also aid in preventing the accumulation of unpaid invoices.

10. Select an Accounting System

Your startup firm’s choice of accounting structure should not be left just to your accountant. Your accountant will help you determine whether to use cash-based or accrual-based accounting. 

In cash-based accounting, businesses record revenue as soon as funds are received. When money gets paid, they start recording expenses. New companies and enterprises that provide professional services and don’t keep inventory should use cash-based accounting.

In the accrual accounting method, income gets recorded when earned rather than paid out. Accrual-based accounting is appropriate for much bigger and more complicated enterprises with a large inventory and many investors.

11. Monitor High-Cost Expenses

Labor and inventory expenditures are the most significant expense for most small firms. Many small firms hire contractors who charge hourly to lower labour costs. 

Due to the contractors’ potential need for fewer hours per week and their lack of benefits requirements, this may be less expensive. You can better budget and discover strategies to manage costs using time-tracking software to determine how much particular jobs cost the company. Businesses can reduce inventory costs by monitoring inventory holding costs, inventory turnover ratio, amount lost to obsolete inventory and other essential data.

Wrap Up

New firms and startups can boost their chances of success by taking steps to set up reliable accounting procedures from the outset. Using software for accounts receivable, setting a budget, and monitoring high-cost expenses are some of the most important actions to remember. A small business’s financial health improves the more frequently it reviews its financial data, which should ultimately contribute to long-term success.

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