How Small Businesses Can Avoid Accounting Problems

How Small Businesses can Avoid Accounting Problems

Table of Contents

There are no successful businesses without successful accounting practices.

It’s safe to say that most of us don’t particularly enjoy working with endless tables of numbers. Not even to mention having anything to do with the piles of un-categorized accounting papers. Nevertheless, we all understand the importance of practical financial accounting in terms of business development. Still, the pain of dealing with this stuff is an immense obstacle for non-accountants.

In this article, we will give you some advice on how you can make this process bearable and avoid severe accounting problems. So, don’t be lazy and read till the end.

To use accounting language – alternative costs of reading this article are considerably smaller than the benefits you’ll derive from it.

Managing your Data Effectively

To manage your accounting data effectively, you need two things: consistency and constancy. This means that you need to start developing healthy book-keeping habits from day one of your business if you want to have an effective financial system in place at some point.

In turn, for this, you need three other things: chart of accounts, transactional documents, and accounting software.

A chart of accounts lists the names of the accounts that a company has identified and made available for recording transactions in its general ledger. A company can tailor its chart of accounts to best suit its needs, including adding accounts as needed.

When we say accounts, we mean everything your company uses, does, or has to do, starting from current assets, ending with payroll expenses.

In order to manage these accounts, you need transactional documents, which are any documents relating to transactions which have been made between businesses and their customers and clients. These include service statements and invoices to request payment for a service. 

This is where Kernel comes into play. We created a simple invoicing software, with which you can create these transactional documents, a.i. invoices in just a minute.

There is a remainder built-in in the application, which means that no due or overdue invoice will get anywhere without your notice. Plus, we also offer reporting functionality, which enables you to keep track of your revenues and cash flow.

If you have any questions, please do not hesitate to contact us or read the FAQ page.

Let’s move onto the next advice now.

Use Different Bank Accounts

If you’re using your personal bank account for business purposes, stop, like, right now. You are unreasonably increasing chances for both, you and your business, to be exposed to some huge additional taxes.

It’s really important to have a different bank account for your business. We can’t stress this enough.

  • Budgeting and making financial predictions will be easier.
  • You will be able to make use of tax deductions.
  • Your credit reputation will improve.

Plus, by using a business card instead of a personal one, you’ll most likely manage to avoid some tax audit headache.

Stay Informed

The most important benefit of the organized accounting system is that it allows you to always be informed of the whole shebang. The more you know about your business the better decisions you can make. So, don’t neglect your books.

At the end of each day, you need to sit down and categorize transactions that took place during the day. At the end of each month, you consolidate all this information, and next month you compare the numbers to see what changed and how.

Decide Whether You’ll Do it Yourself or Hire a Professional

We believe that every business team needs a professional financial team, even if it consists of just one person.

The primary task of accountants, which extends to all the others, is to prepare and examine financial records. They make sure that records are accurate and that taxes are paid properly and on time.

This means you won’t have to worry about chart of accounts, but transactional documents might still fall on your shoulders. It depends on what kind of contract you negotiate with your accountant. He might or might not take care of them.

In any case, our application will be of great use to both, you or a hired accountant, in terms of documenting transactions and organising them in a simple but effective manner. Never will you ever create an invoice in Excel again, you have Kernel for it now. 

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Financial Dictionary for Small Businesses

Financial Dictionary

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