As an entrepreneur, chances are there are things you do really well like running your business or executing your latest idea. But there are other things that you don’t do too well, like raise one eyebrow or close your accounting books every month.
However, if you are like me, you relish on structure and organization. You are looking for ways to raise the bar for your business to improve operational excellence. To that end, proper accounting controls not only ensure compliance with tax laws, but also help you assess the health of your cash flow and operations.
Here are five top accounting tips that I share with small business owners on a regular basis:
1. Set Quantifiable Goals
Part of being well-managed is to set accounting goals that can be easily tracked and tie back to your bottom-line akin to the goals that you may have already set-up for your sales and marketing teams like size of prospect pool, leads, conversion etc.
Top two accounting Key Performance Indicators (KPIs) that you can set your goals against are accounts payable and accounts receivables. For example, you may want to ensure that number of customers or clients with accounts receivables aged greater than x number of days get a phone call or an email directly impacting your bottom line of being able to collect on time and ensuring healthy cash flow.
2. Align Reporting with Accounting
If you assess your business’s health on monthly or quarterly basis, make sure your accounting is also aligned with it. Make sure that your books are closed on time and all discrepancies are reconciled in a timely way. Your bookkeeper should get your approvals and make sure your revenues and expenses show up properly in your P&L. This will give you a view of cash on hand, inventory and so on.
3. Do Accounting on the Cloud
Accounting systems have evolved with cloud technology and there are great bookkeeping systems that are always accessible to you and can help improve your accounting department’s productivity. Choosing an accounting system could be a chore, but there are great products available that will fit your business needs. In selecting a cloud accounting system, make sure that it is extendable to handle your invoicing, billing, time tracking, payroll and other business specific needs.
4. Collaborative Accounting is better
(Disclaimer: I run a collaborative accounting firm.)
Having a team of professional accountants working with your books is a great value-add for a small business who may not want to pay for an in-house bookkeeper or accountant. Collaboration with an accounting firm gives you access to a CFO, controller, and bookkeepers with scalable options that can accommodate your business as it grows. As compared to an in-house bookkeeper, you get a lot more for 40% of the cost.
5. Accounting is More than Compliance
Accounting is much more than tax compliance; it helps you run your business smoother. Accounting and financial data can directly generate business insights and shape strategic initiatives, such as selecting a marketing strategy that results in the best financial outcome.
Having said that, proper accounting procedures and controls also serve as guardrails to make sure your business is in compliance with tax laws throughout the year. This will help to ensure that you are deducting all business expenses, paying all tax liabilities including federal, state and payroll taxes.
Hassan Sultan is a CPA and a Partner at Reckenen with previous experience at a big 4 accounting firms. Reckenen provides delightful outsourced accounting and tax services to entrepreneurs and small business superstars.