By the time a business has been around for 10 years, there’s a dismal 70% failure rate. However, that means 3 out of 10 new business owners are still going strong a decade into their venture. You must believe you will be among the 30% who will start a business, learn on the job, and watch that business thrive.
Part of thriving is mastering small business accounting, and these tips can help.
1. Keep detailed records like you’re a world-class detective
Detailed financial records act as a snapshot, allowing you to quickly see how your business is doing. Do you have more money coming in than going out? Are you growing at a rate that pleases you? Are there any holes in your business plan that you can plug?
Keeping detailed financial records can either be accomplished by hand or by using one of the great accounting software programs available. Or it may be accomplished through a combination of the two.
2. Keep your receipts like you plan to test it for DNA
There are a number of solid reasons to hold tight to your receipts.
- Receipts allow you to do a deeper dive when you’re trying to remember the specifics of a transaction.
- The first paperwork a tax professional will ask you to provide is receipts.
- You’ll need the receipts available if a customer or client returns to you with a question.
Here are two common ways to save your receipts without creating clutter:
- Keep them neatly organized by job in a physical filing cabinet.
- Create an electronic filing system.
3. Understand your tax obligations as though you enjoy paying them
A solid tax software program can help you determine precisely how much you owe to your state and the federal government, and when it should be paid. Some software is also sophisticated enough to answer tax questions and help organize financial records.
Whether you tackle taxes on your own, pay an outside accounting service to oversee your taxes, or use a tax software program, it’s important to understand your financial obligation so you never face fines or penalties.
4. Create a budget, but plan for it to evolve
A budget is the best way to manage your finances and is critical to the success of your enterprise. It will help you stay on track, know where your money is going, and spot changes that need to be made. In short, a good budget should help you waste less and put more money into your business checking account each year.
The first budget you create is likely to look nothing like the budget you depend on a few years into the business. That’s because you’ll have a better idea of how much money you routinely have coming in and going out each month, and you’ll also have a clearer picture of where you want the company to go.
Finally, help is available
Small business owners are fortunate to have access to mentoring programs led by entrepreneurship experts who are willing to meet with you regularly to provide the advice and support you need to be among the 30% of businesses that make it. For example:
- The Small Business Mentorship Initiative (SBMI): Offers resources from entrepreneurs and executives — people who want to help you achieve your goals without making the most common mistakes made by new business owners.
- SBA Mentor-Protege Program: Partners small business owners with experienced mentors who assist them in winning government contracts.
- SCORE Business Mentoring: Provides free advice to small business owners via phone, video, and email. Like the first two programs, it’s run by entrepreneurs willing to share their wealth of experience and knowledge.
- Small Business Development Centers (SBDCs): Independent organizations providing resources and expertise to new business owners in major cities. In addition to mentoring, SBDCs provide business counseling and training programs.
It would be dishonest to say that running a small business is easy. What is true is how satisfying it can be, even if there’s a learning curve to overcome. What no one ever seems to mention is the sheer wealth of knowledge you’ll gain as a business owner, and it all starts with a good idea, a solid plan, and consistent accounting practices.
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