Here are 4 valuable small business accounting tips that will enable you take total control of your business venture. It doesn’t really mattter what kind of business you do, the basics will always remain the same:
1. Have a plan for contigencies:
He who fails to plan has planned to fail. Pay attention to seemingly minute details in your business as tiny leaks can wreck a mighty vessel. Make a honest appraisal of your business and be ready to factor in relevant costs. There are even certain expenses you can plan for 1 or 2 years ahead, such as new store location, expansion of your office apartments e.t.c. You must be willing and ready to acknowledge the seasonal variations in your business, and how they will affect your ability to spend during those times. This will enable you to prepare your finances well for both the lean times and the times of surplus.
2. Maintain a business account:
If by now you have still not opened a seperate account for your business, then you should huriedly do so. By failing to seperate your personal money from your business funds, you make it very easy for you to mix the two and that’s bad for business growth. Draw the line today, even if you are a sole proprietor. Learn to cultivate the saving habit. Set realistic targets to aim for. For instance if you are a poultry farmer, You could decide to save money towards procuring more birds for your business. There must be a balance between your savings and your investments.
3. Record transactions correctly:
Whether it’s a pocket notebook and pencil, a big hardcover ledger, or an Excel spreadsheet, always make sure you keep a copy of all your business transactions. Yes, you must document everything. This is especially useful for planning purposes. You need to know exactly how much is enetering the business as well as how much you’re expending on it. This tells you exactly if you are making a profit or turning a loss and can enable you know whether you’re doing sometging right or wrong and if you should change something.
4. Set Aside Money for Loan repayments and Taxes:
If you have taken money in form of loans from a bank or other lenders, know that it is your duty and obligation to ensure that such loans are repaid. You must strive to spend the money on that business you took the loan for, and not spend it on social irrelevancies. Oftentimes you hear people complaining about the high interest rates of bank loans. The truth remains that nobody forced you to enter the agreement in the first place. If you fail to honour your loan agreements, the expected thing is that your lender assumes the right to enforrce relevant sanctions. That might involve locking up your business place or taking over ownership of your collateral. Now, that would be quite ugly, and we don’t want that.
Also note that there’s currently an aggressive drive by governments in Nigeria at federal, State and Local government levels to improve and enforce tax collection. You must be prepared for that. So systematically put money aside for it rather than waiting to face the unpleasnat consequences that follow not paying as and when due. Every day your office or store remains locked, you lose potential revenue, goodwill, and your existing clients/customers. It definitely is not worth the hassle.
That concludes our discussion on 4 important small business accounting tips. So how have you been going about your business as a small or medium business owner? Have you faced any challenges in the past? If so, how did you overcome? Do you have your own small business accounting tips that have worked for you and you wish to share? Drop your comments and let’s talk.