Keeping detailed track of the finances is key to the success of every small business, but tackling the task yourself can be quite daunting and time consuming. However, at the start of a small business, you don’t have to employ a professional to manage your finances for you as you best know your finances and how to manage it. Now, you can get financial advice from a planner to know how to go about managing your finances, but you have to get your fingers stained with ink and paper cuts when managing your finances.
Today we will give you tips on how to manage your finances properly and what you need to make that happen:
Cash Inflows: All cash payments gotten from sales of your services or products or both and from all other sources has to be carefully identified and recorded. The documentation should not only be done in the cash account/ledger but also in the appropriate account for the source of the cash received.
Payroll Sheet: Your business payroll sheet should be based on detailed private information in personnel files and earnings-to-date. This could contain the various taxes, wages, contributions, PAYE payments, retirement pay, holiday pay and many more. All these need to be properly documented and kept for your business.
Cash Payments: Documenting cash is not all that is needed as you spend money to make money and you need to document your business expenses made. So, in addition to your payroll sheet, create a column or two for the cheques or cash payments made during your business year which may include business taxes, paying off business loans, salaries, inventory purchase and so on. Whatever it is and no matter how little, document all payments.
Purchases and Stocks: In bigger companies, there are accounting departments responsible for keeping track of all purchase orders that have been placed for stock and all other assets and services that the business buys. However, seeing as you may not have an accounting department yet and your purchases may not be so much, you can keep track of all products purchased for sale by the business and, when the products are sold, records the cost of the goods sold.
Capital: A typical business whether large or small, holds many different assets called capital, including office furniture and equipment, display cabinets, computers, vehicles, buildings, and money. Save for certain items, a business has to maintain detailed records of its capital assets, both for controlling asset and for determining taxes.
Okay, that’s the end of our lesson today on basic financial accounting for small business. We hope you learned a thing or two and will put it to good use.