**This article was updated in June 2020**
Running your own business? The importance of staying on top of your own finances cannot be overstated – yet many small business owners lack the financial knowledge required to keep their accounting and bookkeeping processes running smoothly.
Whether you’re a new student considering a career in finance or a small business owner looking to get a handle on your finances, we’ve put together some accounting and bookkeeping tips for small businesses to help fuel their financial futures.
Don’t confuse business with pleasure
One of the most important aspects of business is cashflow – so your bookkeeping process should be an important, separate part of your life. Don’t confuse your personal finances with that of your businesses – and don’t leave your business finances until the last minute. Keep your business bank accounts separate and ensure all transactions related to your business go through that account. Prioritise your paperwork and keep track of your finances, rather than fall behind and be left trying to play catch up.
Define a minimum profit level
Keeping track of your finances is important, but understanding profit is vital. You need to consider all incoming and outgoings to set a minimum level of income your business needs each month to make profit. If you’re just breaking even or not achieving your target, something has to change. Without accounting insight, however, you would be unable to tell whether your business was healthy or not.
Research your tax requirements
Small businesses pay taxes differently compared to income tax, so it’s important you research your tax obligations and stay on top of them. Keep records of your spending and expenses to claim deductions when it’s time to calculate tax.
It’s also important to understand just what tax deductions you’re eligible for. While your Financial Adviser can help you out with this, it’s still good practice to understand just what you’re entitled to.
Ensure you are paid correctly
Invoicing is one of the most important parts of running a business. If your clients aren’t paying you, how can you continue operating? To ensure payments are made, you need an efficient invoicing system and a way to keep track of what has been submitted. Invoicing software can accomplish this – but you can also manually input the data into a spreadsheet and find free invoice templates online.
Small businesses don’t need enterprise-level software
If you’ve only got a small team, there’s no need to spend big on accounting software. Payroll, for example, can be done all on your own. Learn how to use Excel to track and schedule pay for your employees. Purchasing software you don’t really need adds a big expense – whether it’s a subscription service of a one-off fee.
In terms of the software you should purchase, it’s important to look into cloud-based platforms. These help ensure your finances are accessible on-the-go, allowing you to check budgets, manage payroll and more. Plus, cloud-based systems mean safe backups and heightened security which are both essential in modern businesses.
If you study accounting and bookkeeping, track your own finances to avoid having to spend big on software. However, if you don’t want to study a course, you should hire a freelance accountant. You can also invest in software – as an untrained eye can make lots of little financial mistakes which will add up to a costly total.
Consider an accounting and bookkeeping course
Our FNS40217 Certificate IV in Accounting and Bookkeeping course combines the disciplines of both accountancy and bookkeeping into a single study programme. This gives students the skills and tools that they need to enter a career in finance. It's also ideal for small businesses looking to gain clarity and control over their costs, profits and general financial health.