Navigating Accounting Challenges: What Small Businesses Need to Know
Running a small business is no small feat, and one of the critical aspects that often get overlooked or misunderstood is accounting. Proper accounting is not just about complying with IRS standards but also making informed decisions, managing finances effectively, and ensuring your business’s long-term success. In this post, we will explore some essential accounting issues that every small business owner should be aware of. From organizing and tracking business records to planning for major purchases and investments we will provide insights and tips to help you navigate the accounting landscape effectively.
Tracking Business Records
It is a well-established practice, per IRS standards, to retain business records for seven years. However, beyond mere compliance, the benefits of maintaining organized and easily accessible records cannot be overstated. Few things are as time-consuming as sifting through old credit card receipts, making it far more convenient to scan and document transactions in real-time. Today, achieving a secure digital record-keeping system with cloud-based backups has become a straightforward process, eliminating the potential costs associated with damage or loss of physical documents. Additionally, addressing one of the significant challenges in data analytics – disorganized, non-digital, and messy data – is far more manageable with well-kept records that enable seamless data extraction. For streamlined efficiency, searchable PDFs prove to be an optimal solution for quick information retrieval as needed.
Planning for Major Purchases/Investments
Determine a realistic range of additional costs incurred by the project and a range of plausible revenue increases over the life of the project. While creating the models in Excel can be relatively straightforward, determining what constitutes a “realistic” projection often feels akin to making educated guesses. When looking at the less favorable outcomes, determine if you can afford to be wrong recalling the age-old adage, “Don’t bet the farm.”
Mitigating risk can be achieved through the acquisition of market research data, but the future is always uncertain. When comparing different investments and projects, the most common tools are Return on Investment (ROI), Net Present Value (NPV), and Payback period. ROI is the raw return of the project expressed as a percentage of how much you paid, whereas NPV accounts for the time value of money and gives a dollar value to a project. The payback period looks at how long it takes to make your money back. There is no one right tool to use and companies will use multiple, none, or simply go with the “back of the napkin” math. It’s also wise to consult with an accounting or tax specialist to make sure that this investment will have a favorable tax treatment before finalizing the decision.
Investing in Accounting Software
As your business grows, the necessity for software that supports your operations becomes increasingly evident. Different industries have different needs, but a big factor is whether you deal with inventory and whether you make it yourself or buy it from suppliers. It’s easy to fall for software that’s just okay, so take your time to shop around and get your team involved in trying out demos. If you’re not sure what you are looking for, you can always bring in an accounting or IT consultant to help you see through the sales pitch and find the right product.
Automating Manual Processes
Managing data can be a real-time suck, especially when you end up doing the same thing over and over. Ideally, you’d only have to input info once, no matter who’s doing it in your company. Good accounting and POS software can be a lifesaver here, turning quotes into work orders, then into invoices, and keeping track of what’s owed.
Another handy trick is getting the hang of spreadsheets – they can save you a ton of time. On a more exciting note, there’s been a surge in AI assistants that can do things like help you draft emails, create Excel macros, and give you better answers than average Googling.
Outsourcing to Accounting Services Provider
Many small businesses can’t always afford to keep a full-time accountant on the payroll, and even when they do, that accountant often ends up with too much free time or gets bogged down with non-accounting tasks. That’s where outsourcing your accounting tasks comes in handy for many businesses. It’s like getting access to a professional accountant on an as-needed basis. An outsourced accountant brings a ton of experience and industry know-how, and chances are, they’ve dealt with businesses in similar situations to yours before, making them a valuable resource for advice and solutions.
In conclusion, understanding and effectively managing accounting issues is essential for the success and growth of any small business. From record-keeping and financial planning to compliance with tax laws, selecting the right software, streamlining manual processes, and considering outsourcing options, these aspects all play a pivotal role in ensuring your financial health.
At Total Solutions, we understand the unique challenges that small businesses face, and we are here to help. With our expertise and tailored accounting solutions, we can assist you in addressing all your accounting needs. Whether you require assistance with bookkeeping, tax planning, financial consulting, or any other accounting-related tasks, our team is ready to support you.
Don’t let accounting issues hold you back. Contact us today, and let us be your trusted partner in achieving your financial goals.