Accounting is frequently referred to as “the language of business,” and for good reason: Without a basic understanding of its concepts and the knowledge of how to maintain correct records of all financial transactions, small businesses put themselves at danger of Thailand Revenue audits, penalties and fines, cash flow issues, and failure. On the other hand, sound knowledge and ethical accounting procedures raise the caliber of financial data, which results in more wise corporate decisions.
However, small businesses might find it difficult to keep up, especially if the owner of the business also has to handle the accounting function. With the help of the following 12 suggestions, small business accounting can be easier to handle, take up less time, and produce more useful data.
Even though accounting can be challenging, small businesses have found ways to make it simpler. The 12 financial tips that follow, will help you save time and lessen the work required to keep accurate records. They encourage sound accounting practices, which makes “doing the books” easier and more effective for small enterprises with limited resources.
All business functions, but especially accounting, depend on organization. A few missing receipts or shoddy record-keeping might lead to errors in calculations that give an unreliable picture of the financial health of the company. These strategies will help you stay organized.
1. Maintain separate bank accounts: Setting up specific Thai bank accounts and credit card accounts to track just business activity is the first step in arranging a company’s finances. Even solopreneurs may discover that this separation from personal funds makes life easier, even while it is a legal requirement for corporations, LLCs, and some partnerships.
2. Sort expenses into categories: Sort expenses into categories that make sense for the company. The majority of costs fall under broad business categories that can be found on template charts of accounts, like travel, entertainment, office supplies, and utilities. Most accounting software lets you alter the chart of accounts to suit your company’s needs. This makes account coding—the process of giving each transaction the proper general ledger code—more straightforward. For proper reporting, it is crucial to ensure that transactions are coded accurately.
3. Maintain exact records: The significance of maintaining exact records cannot be emphasized. The best way to ensure that everything is captured on “paper” is to record every event as it happens and never rely simply on memory. Take notes during conversations with clients, lenders, and suppliers, for instance, and put “memo” remarks on checks and invoices.
4. Keep receipts: It’s crucial to preserve high-quality expense-related supporting paperwork, such as receipts. The information needed to support expenses, such as quantities spent, descriptions, and suppliers, must be included in receipts. They also need to be simple to read. The majority of tax professionals advise keeping receipts for up to seven years, which might result in an excessive amount of paper. Another tip for streamlining and organizing this procedure is to digitize your receipts.
5. Maintain order in profit and loss (P&L) statements: An income statement, often known as a P&L, provides a valuable overview of revenue, costs, and profitability. If maintained up to date and correct, it can aid in making better selections. Comparing the P&L statements from several fiscal periods is a useful hack for spotting potential inconsistencies, omissions, and trends.
Accounting is not a task that can be “set it and forget it” even with the best tools. Among its many components to consider are:
6. Reconcile accounts at least weekly: Keeping your books up to date and accurate doesn’t have to take a lot of work thanks to regular comparisons of general ledger account balances to external sources. It’s crucial to perform a weekly cash/bank reconciliation to control cash flow and keep an eye out for fraud. Another technique to monitor cash flow and client payment status is to perform a weekly reconciliation of accounts receivable/cash application, which involves comparing customer invoices to their corresponding invoices.
7. Pay your business taxes on time. Small businesses, which are often strapped for cash, should pay their taxes promptly to avoid incurring hefty fines and penalties. Taxes paid by businesses include ad valorem, self-employment, payroll, and income taxes. Paying estimated taxes carefully lowers the likelihood of late fees and helps prevent unforeseen expenses at the last minute.
8. Establish quantifiable accounting goals: This advice consists of two parts. To ensure that daily accounting activities are finished in a reasonable amount of time, set goals for them in advance. When jobs pile up, they frequently take longer to accomplish. Second, set longer-term objectives for the entire accounting function and its outputs. Examples include determining the necessary milestones to satisfy pertinent deadlines, such as those for tax or payroll files. It’s crucial to arrange certain periods for conducting financial analysis and keeping track of KPIs like sales, working capital, and profit margin percentage.
9. Keep track of deadlines: Accounting is a deadline-driven activity, making it difficult for small business owners to balance their many priorities. Plan and plan short-term, mid-term, and long-term deadlines because failing to meet them may result in sanctions, fees, and operational difficulties. Take into account, among other things, the deadlines for processing weekly payrolls, the monthly financial close, and quarterly loan compliance.
10. Manage cash flow: It is commonly known that cash flow problems are one of the main causes of small business failure, thus using tricks or strategies to help manage cash flow is essential. Automated billing and accounts receivable management (hacks 11 and 18) aid in boosting a company’s cash flow. Similar to how diligent account payable management and disbursement planning balance cash withdrawals from the company. Finally, responsible credit use can assist close unforeseen gaps in cash flow.
11. Manage receivables: Small businesses, which are more likely to experience fluctuations in cash flow, should place a strong focus on actively managing accounts receivable. Since the likelihood of successful collection decreases over time, it is a good idea to review open accounts receivable on a regular basis (e.g., daily or weekly) to quickly identify customer accounts that are past due or about to do so. In a similar vein, it’s critical to promptly apply client payments to open receivables in order to preserve positive customer records and relationships.
12. Predict the future: Consider the company’s future while using the financial data that was generated. Establishing budgets, performance targets, and financial and operational predictions will help the business get ready for the future.
It is a lot to think about alongside every other hat you wear for business and we at Supreme Life Accounting love the details you hate, so get in touch for a coffee and see how we can streamline your business , make you more profitable and relive the stress to do what you actually enjoy doing.
