Small business accounting: 10 tips and advice for financial success

Managing the finances of your small business can seem like a daunting task, especially since the success of your business heavily depends on accurate and well-managed accounting practices. But it starts with getting the basics right and ensuring that best practice guidelines are followed. In this blog, we’ll explore some of those and explain why they matter.

What is small business accounting?

Accounting is the gathering and analysis of financial information and covers everything from bookkeeping (tracking expenses and revenue) to getting ready for tax season and preparing financial reports. It entails keeping close tabs on your inventory, assets, liabilities, and cashflow.

By doing so, you’ll be better placed to secure investors, guard against theft, maintain profitability and make informed financial decisions. That’s why small business accounting is just too important to take lightly and why we’ve put togetherten tips to steer you in the right direction.

10 small business accounting tips to remember

1. Keep personal and business finances separate

This one is bound to top any list of small business accounting tips, because it’s a mistake that many business owners make. It’s vital to maintain a clear separation between personal and business finances, starting with a dedicated business bank account to manage all business-related transactions. This is not only to make it easier to manage, but also to protect your personal assets in case of any legal issues or debts.

2. Keep detailed records

Efficient accounting means accurate record-keeping, and that entails being meticulous about recording all financial transactions, including sales, expenses, invoices, receipts, and payroll. Gaps in your financial records are sure to spell trouble so make this information is secure.

3. Keep a close eye on cash flow

Cash flow is the lifeblood of a small business and it needs to be continuously monitored. The flow of incoming and outgoing funds tends to follow a pattern that you can use to predict fluctuations and plan accordingly. Be sure to keep an emergency fund for any unexpected expenses.

4. Stay on top of invoicing

Timely and accurate invoicing is essential to keep cash flow moving, so you need to establish clear payment terms for clients and be prompt about invoicing them.

5. Don’t neglect your taxes

Not only is it important to meet all SARS filing deadlines to avoid penalties, you need to ensure that you’re clued up on the regulations relevant to your business and remain compliant. To optimise tax deductions and credits, or if things get complicated, you may need the help of a professional.

6. Regularly reconcile bank statements

By checking your bank statements and reconciling them with your accounting records, you can pick up any discrepancies or errors. With this process, you can ensure that your transactions are being accurately recorded and identify any potential fraud.

7. Understand your financial ratios

With financial ratios you can gain invaluable insights into the financial health of your business. Get familiar with key ratios like those pertaining to profitability, liquidity and efficiency. Analysing these ratios can shed light on problem areas and guide decision-making.

8. Prioritise debt management

If your business has loans or lines of credit, be sure to prioritise the management of those debts. Make timely payments to maintain your credit score and avoid penalties. You should also consider refinancing a loan to secure more favourable interest rates.   

9. Set up a budget

A comprehensive budget helps in planning and allocating financial resources, and it’s important to create one that encompasses both short-term and long-term financial goals. Then monitor your actual expenses against the budget to identify areas where you may need to adjust spending or increase revenue.

10. Get the professional support you need  

Going it alone might seem like a good way to save a buck, but not getting the help you need could turn out far more costly in the long run if you’re not able to keep a handle on your accounting. From expert financial advice to outsourced bookkeeping and accounting, professional support will afford peace of mind and allow you to focus on running your business.

The solution for your accounting

Good accounting practices matter because they provide a clear picture of your business's financial health and serve as a solid foundation for achieving long-term growth and sustainability. And although it might seem overwhelming at times, small to medium-sized businesses in any industry can lean on a capable partner for any of the services they require, from bookkeeping to financial management.

Take a look at what Rae & Associates can offer.