Manage Your Small Business Finances With These Expert Tips

With so many cloud accounting programs out there, it’s easier than ever for small businesses to keep their own books. But are small business owners overlooking important details when managing their own finances?

Here at Merchant Maverick, we know accounting isn’t easy, especially if you have no previous business background. That’s why we reached out to seasoned accounting professionals and certified CPAs to learn their top accounting tips for small business owners. Read on for valuable advice from industry professionals.

Switch To The Cloud

As a small business owner, you have plenty of time-consuming tasks to worry about; accounting doesn’t have to be one of them. That’s why we love the time-saving mobility that cloud accounting programs offer. Turns out we aren’t the only ones who recommend cloud-based accounting.

Tom Kelly is the Sr. Director of Product Marketing at Oracle + NetSuite. Here’s what he has to say about cloud-based accounting:

If you are not leveraging the Cloud to streamline your accounting processes you need to be. Everything from your ERP to how you manage the travel and expense report process should be Cloud-based. It will allow a small company the ability to focus on the things that matter most versus focusing too much time and resources on administrative activities.

If streamlining your finances by switching to the cloud sounds like a good idea for your small business, take a look at our top-rated accounting programs to find which software is right for you. Or read Accounting Software: Cloud-Based or Locally Installed?

Automate Your Bookkeeping

If you’re currently using accounting software, there is an array of automations at your fingertips. Don’t let them go to waste!

Aaron Lesher, CPA and Head of Customer Success at Hurdlr, shares his advice about some of the most time-saving automations small businesses should be using:

Automate your bookkeeping to track business earnings and expenses using an app that links with your bank account to automatically pull transactions and saves receipts. Delegating this boring task saves you tons of time, empowers you with real-time profit and tax estimates, and allows you to spend more time on growing your business. 

Automations like live bank feeds, automatic transaction categorization, and receipt scanning can save time. Use them whenever possible.

Separate Personal & Business Expenses

No one wants to get audited. One of the biggest red flags the IRS looks for is a conflation of personal and business expenses.

Several small business accounting programs, like Wave, allow you to isolate personal expenses from business expenses. However, Josh Zimmelman, owner of Westwood Tax & Consulting, says the solution is to create separate personal and business accounts:

Set up separate checking, savings, and credit card accounts for your business, so you can keep track of your business spending without it getting mixed up with your personal spending. It will make figuring out your deductions and filing your tax return so much easier… If you use something for both business and personal purposes (such as a cell phone) you can deduct a percentage of the expenses on your tax return based on the percentage of use but you’ll need detailed call logs and other documentation to back that up. 

Opening separate personal and business accounts can help save a lot of headaches down the road.

Simplify Your Chart Of Accounts

Understanding a chart of accounts is hard enough. Make your life easier by keeping your chart of accounts simple. Most accounting programs provide a default chart of accounts, but it’s important to edit the accounts to fit your specific business.

Crystalynn Shelton is a CPA and writer for Fit Small Business specializing in small business Bookkeeping, Accounting, and Taxes. She explains how a simple chart of accounts pays off:

Tip #1: Keep the Chart of Accounts simple. Make sure that you only set up accounts that you will use often and not once every blue moon. For example, ‘office supplies’ is an account that most businesses will use often. Let’s say that you purchased flowers for your personal assistant for Administrative Professional’s day; don’t create an account for ‘flowers’; instead, you can set up an account called ‘Miscellaneous expense.’ 

If you need additional help or ideas, check out our detailed article: How to Set Up Your Chart of Accounts.

Stay Informed

Keeping your books up-to-date can be overwhelming, but finances don’t have to be a burden. Accounting software offers plenty of tools–like reports–to help you understand your business’s finances.

Martin C. McCarthy, a managing partner of McCarthy & Company, PC, says not only should you understand your accounting reports, but you should look at them frequently. According to McCarthy:

Many small business owners focus too much time on operations and not enough on accounting and finance. Some owners assume it is good enough to work on bookkeeping and financial reports once per month, where others focus on these functions quarterly. Savvy small business owners know that it is important to keep their books current and to review the numbers presented in their financial statements (income statement, balance sheet, profit and loss statement, and cash flow statement) at least monthly. This is the only way to make sound decisions to keep your company in business.

Staying up-to-date on your business’s income, expenses, and activities will allow you to make informed business decisions.

Keep Solid Records

One of the main purposes of accounting is to record your business’s income and expenses. These financial records help you recognize important trends in your business, ease the tax filing process, and protect you in the case of an IRS audit. But what’s the best way to compile and save these records? To answer that question, we’ve enlisted the help of a few experts.

CPA Michael Gray believes that documentation is one of the biggest issues small businesses need to consider.

My #1 accounting tip is to maintain good documentation. You should at least maintain PDF copies of your bank account and credit card statements so that you can readily access them… Many businesses are moving to becoming paperless operations.  They scan their supporting documents and store them on their computers or online on the ‘cloud.’ The documents should be filed in an orderly way so that you can find them… When you are keeping documents on a local computer, it’s essential that back up copies are kept in a separate, safe location so they can be retrieved in the event of a theft or disaster.

Crystalynn Shelton provides another compelling reason to take documentation seriously:

Scan all receipts and important documents to the cloud. The IRS requires you to keep copies of all financial records for at least 7 years. Before you know it, you’ve got more filing cabinets than employees! In addition, the ink on receipts tends to fade after awhile. By scanning these documents and organizing them in the cloud, you can get control of the clutter and easily located documents when you need them! 

The last thing you want is to misplace important documents or have receipts fail you when you need them most. By keeping solid records you will be more aware of the financial state of your business. Most importantly, you’ll have peace of mind knowing that you are equipped to survive an IRS audit.

Utilize Software Integrations

Almost all (good) cloud accounting programs offer third-party integrations. These integrations, which can encompass contact management, email marketing, scheduling, and more, are extra tools you can use to help your small business succeed.

The biggest advice of Moshe Amsel, founder of DreamBuilder Financial, is to take advantage of third-party integrations:

There are hundreds of applications that integrate with QBO and Xero and will bring inefficiencies into your business. Don’t be afraid to try new applications and see if they benefit you.

Integrations provide essential features, without which you might have to change accounting solutions altogether. Most integrations come at an additional cost, but they can be more than worth the price if you’re getting the functionality you need to run your business. If you don’t know where to start, take a look at the 25 Must-Have Accounting Integrations for 2017 for a few ideas.

Outsource Time-Consuming Tasks

As a small business owner, time is precious. Cloud accounting and automations can save you valuable time, but it’s important to know when to outsource the tasks that are sucking hours out of your day.

In 50 years of financial leadership, the one thing CPA Charles Read has learned is to outsource time-consuming tasks, especially payroll:

Outsource your payroll to a service bureau that has CPA’s on staff to handle your compliance problems.  Don’t burden yourself, your staff, or your accountant with the details of payroll that you and your team don’t understand.

The most valuable piece of this advice is to consider outsourcing the tasks that aren’t in your wheelhouse — even if that means handing over your accounting processes to someone who understands them better.

Know When to Hire An Accountant

Along that same vein, knowing when to hire an accountant is incredibly important. While we believe any small business owner can learn to do their own accounting, not everyone should. There are some cases — when setting up your legal business entity, checking deductions before filing taxes, or fighting a tax audit, for example — when you really need the help of a licensed professional.

Even business owners who are well-versed in accounting have to consider whether the time it takes would be better spent on other matters.

Martic C. McCarthy has some thoughts on when you should consider hiring a CPA instead of doing everything yourself:

Accounting firms typically offer bookkeeping and payroll services. Small business owners who do not have the time to focus on these areas or are not trained in accounting should consider working with a certified public accountant (CPA). Doing so will ensure that their books are kept updated, the numbers reported on their financial statements are current and accurate, and that they are following all the IRS payroll reporting, tax filing and payment requirements.

Final Thoughts

Life as a small business owner is complicated. We hope that the practical advice above helps make it easier to stay on top of your finances. If these tips work for actual CPAs, they can work for you too. Let us know which things work best for you in the comments below!

Are you a CPA or accounting expert with something to add? Please share your top accounting tips with us in the comments as well.

And, as always, if you need help choosing accounting software or want to learn more about accounting, our unbiased accounting software reviews and blog are here to help.