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5 Tips to Simplify Your Small Business Accounting Processes

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StrategyDriven Managing Your Finances Article | 5 Tips To Simplify Your Small Business Accounting Processes

Starting a business or owning one takes a lot of work. You’ll need to manage your business capital and finances and keep the company on the right track. Implementing small business accounting processes is one way to do this.

Business accounting refers to the practice of recording, analyzing, interpreting, and presenting financial information systematically. This is crucial for every business as finances need to be managed, liquidated, and organized. However, these processes can be complex and challenging.

To help you, this article discusses five helpful tips to simplify your small business accounting processes. Keep reading!

1. Separate Your Business and Personal Finances

This part is crucial when operating your business, whether big or small. Doing this helps you make sure everything is clear. Moreover, you can easily track all your business-related expenses without resulting in any mistakes and discrepancies.

You can start by setting up a ‘business only’ bank account. You can also include having business credit and debit cards or any other form of payment for your business. It would help if you also considered filing to become a limited liability company (LLC). This will help protect your personal assets in case your vendors or clients try to sue you. All of these can help you and make your accounting management processes a lot easier to manage.

2. Engage With a Professional

Accounting can be complicated but be confident. You can always ask for help from professionals to help you in your small business accounting processes. Hiring an accountant is an option, and here’s why:

  • It Saves Time And Money: Accountants take over your supposed financial tasks and let you focus on the core operations of your business, boosting productivity and increasing profit.
  • It Helps To Prevent Tax Penalties: They are fully aware of different tax liabilities and knowledgeable enough to minimize and handle the risks for your business.
  • It Can Assist In Growing Your Business: They can organize all your accounts. In addition, they can provide valuable insights if you’re planning for an expansion.
  • It Can Provide Security: Accountants are knowledgeable in data protection rules and regulations.

These are just a few benefits of hiring an accountant for your business firm. You can also consider talking with a financial expert to guide you if you want to seek more advice. That way, you can learn additional information and ensure your decisions suit your business.

3. Centralize Your Payment Scheme

Using different forms of payment can be confusing and challenging to manage. Therefore, it is essential to centralize your payment. You can do this by paying your vendors from one single source.

You can apply this to your clients as well. If your clients were to pay, you should ask for payment as soon as possible and provide them with a short time gap for their payment. That way, you can ensure you will have a steady cash flow in your business.

4. Always Check Your Financial Records

Keep everything recorded for you to check the accuracy of financial data. You can analyze your income, cash flow statement, and balance sheet. You must understand how much money you earn and what you spend. Moreover, you should know where your money is coming from and where it is headed.

To check and keep your financial records updated, you will need an hour or at least 20 minutes to keep everything recorded. Furthermore, it is vital to set aside time each week instead of at the end of the month to balance your book. Always triple-check your records to ensure the accuracy of financial information.

StrategyDriven Managing Your Finances Article | 5 Tips To Simplify Your Small Business Accounting Processes5. Automate and Streamline Your Small Business Accounting Processes

The digital age contributes to efficient business operations. Therefore, consider embracing technology to streamline your accounting processes. To upgrade your accounting processes, here’s what you should do:

  • Focus on digital applications offering essential features you can use. As much as possible, look for cloud-based accounting software that can easily access and update software automatically.
  • Consider using invoice and payroll management tools.
  • Determine the cost-effectivity and scalability of the software tool.

It would be best to prioritize all these if you embrace new technology. If you still need to become more familiar with these, you can start by using spreadsheets online. Moreover, consider using existing generated templates to make it easier. For instance, learning new software like Finlyte can initially pose a challenge but often proves to be beneficial in the long run due to its diverse features and user-friendly interface.

Conclusion

Applying these tips can help you simplify your business accounting processes. Implement it accordingly to ensure the efficiency and productivity of your business. Accounting can sometimes be complicated, but with the right decisions, it can be more accessible.

Here’s a Budget to Use if You Hate Tracking Expenses

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StrategyDriven Managing Your Finances Article |Budget Strategy|Here's a Budget to Use if You Hate Tracking ExpensesIf you’re looking for a budget strategy that suits your own personal approach to finance management, then you’ve probably considered plenty of options. After all, there are a handful of different methods out there, from the envelope budget, to the strategy that involves placing everything you can onto an automated payment process.

Probably the easiest option of all for people who hate tracking expenses is the 50/30/20 budget. This is a budgeting plan that recommends that you should be spending 50% of your income on the things you need (mortgage and food for instance), and 30% on the discretionary items that you want. The remaining 20% goes into your savings and helps you to tackle your debt.

So, how does this budget work, and is there a better option?

The Rules of the 50/30/20 Budget

The 50/30/20 budget is designed to help you manage and understand your money a little better. It requires you to look at your incoming and outgoing expenses and decide where you need to assign your cash to wants and needs. To use the 50/30/30 budget effectively, you need to understand the difference between necessary items like paying off your loans, and unnecessary or “discretionary” items like Netflix subscriptions.

Some people have a lot of trouble figuring out the difference between what they want and what they need. For instance, you know you need food, but you only want a specific brand and extra treats from the bakery aisle. Additionally, it’s worth noting that not everyone can handle the process of constantly classifying their needs and wants or tracking their spending.

If you’re not the kind of person who likes to watch every penny, then you’re going to struggle adhere to the 50/30/20 budget – that presents a bit of a problem.

The 80/20 Budget Alternative Approach

If you hate tracking your spending, you’re still going to need to make some changes to your expense strategy. For instance, you can’t just choose the first personal loan option you see because you can’t be bothered to compare your options for a better deal. Ultimately, good money management requires an active approach to spending. However, you don’t necessarily need to spend every day watching the pennies either.

The 80/20 budget asks you to place 20% of your money towards your savings, while the other 80% goes on everything else – that includes both your wants and your needs. The beauty if this strategy is that you don’t need to track your spending as often. You can simply take 20% of your income away from your monthly money and place it into a separate savings account. Then, you know the rest of your cash is left to spend on your must-have and discretionary items.

Of course, it’s still a good idea to track your spending from time to time if you want to look for ways that you can cut down on your regular monthly costs. However, the 80/20 budget will give you more room to spend money freely.

How to Use the 80/20 Budget

With the 80/20 budget, the best thing you can do is set up an automatic deposit that moves money from your standard current account into your savings account as soon as it comes to you each month. That way, you won’t accidentally spend it. Once your cash has been distributed into the savings account, your checking account money is yours to spend; however you need to use it.

Ideally, you’ll want to check on your spending strategy once every couple of months to see whether there are any trigger areas where you might need to cut back on your spending. This is particularly useful if you find that you don’t have enough cash left over after bills to spend on the things that you want, or if you want to put 25% of your income in savings instead of 20%.

You’ll also need to make sure that the money you’re going to spend on your bills goes out of your account before you start using money for discretionary spending. The last thing you want is to assume that you’ve got around $500 when you actually have $200 waiting to be taken out for your insurance bills.

Once you see how much money you have left after you’ve subtracted your savings, subtract the cost of your bills too, and whatever is left should be yours to spend. This budget requires some care and attention, but it requires a lot less work than the average 50/30/20 budget.