Business accounting: 5 tips to follow
1. Allocate resources (time and money) for accounting
“As soon as you launch your business, it’s essential that you set aside time—and possibly money—for accounting, cash management, and potentially financing your business,” says Simon Lapointe.
“Of course, it’s not always easy to find the time when starting a business and, quite often, you have to wear many hats. That’s why you have to block out time in your schedule to do your business accounting. This could be 30 minutes every morning when you arrive at the office, one night a week, etc.
“Keeping your accounting up to date is a never-ending job, and ensuring your invoices and receipts also stay updated is essential. There’s no need to keep everything stuffed in a shoebox — you can instead, for example, take photos of your invoices and receipts with your phone and efficiently manage them with IT support.”
2. Surround yourself with the right people
“If, in the beginning, you’re unable to take the time to do your accounting, you can hire an outside bookkeeper for a few hours a week,” explains Simon Lapointe. “Sub-contractor accounting services can be a good option when you are just starting out and don’t need a full-time employee.
“After that, as the business grows, you will probably need to hire someone who will take care of your accounting on a daily basis. You will also have to find a chartered professional accountant to do the company’s income tax returns, prepare financial statements, etc. This accountant should also be able to offer you sound advice and guide you as your business grows.
“It’s very important that you find trustworthy people to build business relationships with. Ask the person in charge of your accounting how much they are willing to invest in your business. Ask your professional accountant the same question. To find the best candidate, ask for recommendations from your contacts, banker, or other trusted partners. Larger accounting firms may be more expensive, but they have the proper expertise that is often much more extensive and complete. That being said, many small firms can do an excellent job and may be better suited for this kind of task. It all depends on your needs and the size of your business.”
3. Make a budget
“In your accounting, making a budget allows you to properly manage your cash flow,” adds Simon Lapointe. “You have to structure your cash flow, which is to say, the company’s inflow (money coming in) and outflow (money going out). You need to accelerate and ensure you receive your cash inflow (i.e. operating and capital revenues), decrease or delay your outflow as needed (i.e. salaries, suppliers, equipment, etc.), and constantly keep an eye on your finances to see where you are in relation to your projections.
“There are many ways to reduce or delay your outflow: use your credit card to pay for your liabilities (which can delay payment by one month, but you’ll still need to pay off your card), keep only the inventory necessary to serve your customers, or structure your employee compensation so that it is linked to cash inflow (bonuses, commissions, etc.). To accelerate your inflow, you can improve the collection rate of your debtors by offering discounts for fast payment, have product pre-sales or, as needed, speak with your financial institution for access to short-term funds.”
For more information, read the full article on National Bank website.