Back in the day, becoming an entrepreneur was a tough nut to crack. The primary reason behind this was that kick-starting a business venture used to be a complicated process. Fortunately, that is not the case anymore. Today, anyone with a promising business idea can dive into the world of entrepreneurship. All thanks to modern-day technological tools that have either minimized the initial hassles or cut them entirely out of the equation. The key is finding efficiencies, such as accounting hacks to make your job manageable.
Despite all the tools available, t is still shocking to see several businesses failing to make it big despite sophisticated technology's availability. Statistics illustrate that around 350,000 businesses shut down every year. The figure makes up for 10 percent of the total numbers. That is a staggering number.
Among other things, financial mismanagement is right up there that triggers the doom of a company. Money is at the heart of a business. If you fail to keep a proper check on it, you are asking for trouble.
To make life easier for you, we have compiled a list of accounting hacks. Rest assured, they will not only ensure that you hang in there but also thrive:
Business people tend to merge personal and the enterprise's finances. Surprisingly, this is a common phenomenon among entrepreneurs who possess sufficient business knowledge to know the basics. They typically assume the money will come back to them at the end of the day, so why bother creating a separate account. It sounds like a reasonable argument on the surface. But if you dig deep, you are likely to come across clear benefits of having a business-only account.
For example, sometimes, a business requires additional funding to delve into a big project. In that case, you will have to approach a lender who will ask for a transparent credit history of your business. If you have personal and business expenses mixed up in one account, the lender will most likely turn a blind eye to your loan application.
Another upshot of creating a business account is that it frees you from personal liability. In simple words, when a company comes to a standstill, creditors can't hold the owner accountable to pay on behalf of his company.
Here are some other advantages of possessing a business account:
Every business owner has to wear multiple hats. More so, if you happen to run a small business. Since accounting is a full-time job, you may end up making irreversible blunders even if you are well-versed with the ins and outs of accounting. Hence, it is highly advisable to hire someone who has a relevant qualification and can maintain books. Skilled resources with an accountant online degree will also suffice. The idea is to learn the best accounting hacks so that you do it properly and efficiently.
Accounting methods are divided into two categories – cash and accrual. It is mandatory to pick them for your business. Both these methods have their share of pros and cons. As a rule of thumb, experts recommend going for a cash accounting method if you are a small business owner as it is super easy to implement. On the other hand, the accrual accounting method is more suitable for big companies with an abundance of resources and a broad customer base.
It bears worth mentioning that selecting a suitable accounting method has to do with the goals you want to accomplish. Although you can change the accounting method later in time, it can be a very tiresome procedure. So take your time to evaluate your business thoroughly and then make the final call.
When you are running a business, the last thing you would want to do is to rely on are guessing games. Many entrepreneurs realize that they have no money to continue their business operations in the middle of a project. And by the time the realization hits, it is already too late to arrange funds.
That is where preparing a detailed business budget makes a big difference. It gives you a vivid idea about future expenses. After coming to terms with the amount required to achieve future goals, you can take various measures to stabilize your financial standing to meet those goals. Besides, it will prepare you to meet unexpected challenges down the road.
If you do not know the essence of a 'solid' budget, you will find the following tips pretty useful:
Categorizing expenses is something that businesses usually carry out during the tax season. But it should be an everyday occurrence. So much so, expense categorization is even necessary for businesses in their initial phase when they have yet to engage in complicated documentation.
Arguably, the most significant advantage of subscribing to accounting hacks like this is keeping track of expenses contributing to unnecessary spending. Once detected, it will be easier for you to control things before it's too late.
It would be best if you considered splitting expenses into the following costs:
Every business person does their best to get honest and integrate employees on board. Yet, financial frauds are rampant in the business world. According to a widely cited study, a business loses nearly 5 percent of its gross revenue owing to fraudulent activities. Internal controls can lead to better checks and balances within an organization.
Here are some of the tried and trusted internal control strategies you should implement right away:
The final word
Accounting is one of those aspects of business processes and productivity that can make or break your business. So you can't afford to go wrong here by any means. We have listed basic accounting hacks and practices. Sticking to these can ward off a lot of financial concerns during your business journey.