By Lawrence Levinson, Director, Wave Advisors at Wave.
The spiders. Snakes. Heights. These are common fears for the average person, but for small business owners? One of the scariest (and most intimidating) experiences for them can be keeping books. Most small business owners start their businesses because they have a passion or a profession that they want to share with others. They went into business to focus on their passion, not the headaches and stress that often comes with managing the financial side of their business.
Fortunately for small business owners, the one thing in common is that they are preventable with the right approach. Keeping in mind a few essential best practices will help your small business weather any storms and achieve entrepreneurial longevity.
Let’s explore some of these common accounting fears and how business owners can avoid them.
Mix business and personal expenses in one account
This is by far the most common mistake small business owners make, especially as work and life get mixed up more than ever.
While purchasing a few items from a supply store with your personal credit card here and there may seem trivial, having to scour your bank statements to find and categorize those expenses with looming tax deadlines can be a major headache. In fact, our team has already spent over a week helping a client reconcile business expenses for an entire year on not one, not two, but Three various personal checking accounts, as well as their professional accounts.
Opening a small business bank account can seem daunting, especially if you’re a new business owner, but there are no-fee business bank accounts that sync banking with accounting, like Wave Money, which reconciles transactions. as a business owner. on the map. This is a great option for those looking for a simple solution to separate their personal finances from business expenses.
Store a shoebox full of receipts
A word processing document or an old-fashioned spreadsheet is one thing, but dozens of small business owners have come to us admitting they use a real shoebox as the primary source for storing copies of receipts and invoices. In one case, we spoke to a panicked small business owner whose husband accidentally threw away almost an entire year of receipts, with only those in the bottom of his purse to reconcile.
Unfortunately for this client and other small business owners before her, relying on physical copies of business documents and possibly misplacing them not only results in missed deductions in tax season, but also a significant lack of visibility into them. cash flow. Having a clear view of money coming in and going out is key to a business owner’s financial health. This can help them determine when their incomes tend to fluctuate, their high and low seasons, the best time to consider calling for extra help or investing in major equipment.
Modern, smart, and automated accounting software can organize expenses and empower you to make smart investment decisions with a better understanding of how much money is flowing in and out of your business.
Don’t hire a professional for the job
One way to avoid some of your accounting headaches is to outsource the job completely. That said, all too often, small business owners look to friends or family in their network who can claim to be experts at running their own bookkeeping. But at the end of the day, they don’t have a solid understanding of the basics of accounting as well as the experience to understand how the needs of business owners can differ depending on the type of business they run, their size. and the sector in which they operate. Help can often end up costing much more.
Taking the time to consult with a bookkeeping advisor with relevant and specialized expertise based on your goals and needs is money well spent.
Administration and bookkeeping is a problem for many small business owners, but today’s digital bookkeeping and banking solutions can save them countless hours and headaches. These solutions are designed to save business owners time, help them take control of their finances, and develop the confidence to make informed business decisions, like expanding their customer base, investing in marketing, or even hiring their own. first employee. Coaching from qualified experts can help these business owners take their growth to the next level and give them the freedom to pursue their passions without being distracted.
Lawrence Levinson is the Director, Wave Advisors at Wave. His team provides personalized accounting and bookkeeping services to small business owners that complement Wave’s digital offerings.