Perhaps the number one action you can take to support the financial health of your small business is to stay on top of the accounting. Let’s express that idea another way: Small businesses that do not put their accounting practices first and foremost will find themselves faced with financial health problems. Make sure you’re aware of the most common yet debilitating small-business accounting challenges — and learn how to overcome them. We’ll tell you how!
Banking
You’ve been banking for years, and you know how to manage the task. However, when you own a business, banking isn’t like managing personal checking and savings accounts. Unfortunately, many small business owners use their personal funds to pay for business expenses, especially when first starting out. Even small costs add up over time. This “cross contamination” of spending between personal and business accounts can lead to costly mistakes, not to mention headaches for your accounting team. Keep personal expenses and business expenses separate all the time. Have dedicated bank accounts and credit cards to use only for one or the other. If you need to track down an expenditure, you’ll only need to look in one place. It will also add to your credibility when presenting financial information to a lender, and in the event of any kind of audit — well, irregularities will lead to closer inspection, which will turn up MORE irregularities… you get the point!
Budget
When bank accounts are separated, budgeting becomes systematically easier. Of course, you are using accounting software help you keep up with money coming and going to and from your business. However, simply entering information into a software program is not the end of the work when balancing a budget. Thinking that is true ends up being the downfall of many small businesses. Budgeting for a business means forecasting to manage inventory, payables, payroll, taxes, and if resources permit, to help ensure that unexpected expenses might also be covered. A shift in any direction can throw off any budget. That’s why many small businesses choose to outsource their accounting. The known expense upfront can far offset costly budgeting errors down the road.
Unexpected expenses
As mentioned above, good financial management includes considering the unexpected as part of your budget. Additional taxes, payment delays from customers, rising costs of materials and supplies, new employee training, etc., are all possibilities. So a competent manager plans for the unplanned expenses. A qualified accountant is familiar with these unexpected expenses by industry segment, and other cashflow risks that your business could face, and knows how to help you prepare for them. Awareness of what could financially happen in business is crucial to long-term profitability. Knowing what the normal expense ratios are for your market, and how to spot analytical signals that could mean trouble is coming are accounting skills worth paying for by hiring an experienced, proven expert.
Baum CPA is experienced and helpful with all small business expense and tax issues. Are you ready to alleviate the accounting challenges in your small business? Click here to schedule an initial consultation with us today.
Payroll
While unexpected expenses are possibly the most daunting for a small business, payroll is almost always the most significant. Payroll entails more than what you pay employees. There’s matching FICA (Social Security) and Medicaire tax contributions, state unemployment insurance, workers’ compensation insurance, and possibly other indirect costs. New employee classification, if incorrect, could cost you a bundle in penalties. Other payroll-related accounting challenges are pay accuracy, proper tax filing, compliance, and paid time off tracking. In most service industries labor costs add up to more than 50% of gross revenue for a business!
Unless you’re an HR professional, and chances are you’re not if you’re the business owner, consider recruiting a qualified accountant to help you manage payroll. It will save you headaches in the short term and money in the long term.
Taxes
A conversation about accounting and small business isn’t complete without discussing taxes. The tax struggle can be daunting, from filing to making sure you pay enough but that you don’t tie up vital cashflow with overpayments. A significant challenge regarding taxes is merely keeping up with ever-changing tax laws. A qualified accountant or CPA will be up-to-date on new regulations and guidelines so that you don’t have to be.
Overcoming accounting challenges like these is easy with a qualified accounting team on your side. Consider outsourcing your accounting needs so that your focus remains where it should — on running your business, your way.
Contact our accounting professionals at Baum CPA now for help managing your small business finances. Why not treat yourself to extra peace of mind by making Baum CPA your trusted, expert, professional, full-service accountant and tax preparer? We know how to help small business owners stay out of trouble. To schedule an initial consultation with us today, click here.
This blog and its authors provide this content strictly for informational purposes. No content herein should be misconstrued as financial advice. Everyone’s specific circumstances vary — Always consult with a qualified, licensed financial advisor, legal counsel, and tax professional before venturing into any investment or business activities.