What Are Some Accounting Strategies?

Accounting is a critical function that collects, records, and analyses financial data, providing extensive insights into corporate activities.

Companies can use past financial data to develop growth strategies and set realistic future goals. Accurate financial analysis helps business owners and managers identify areas for improvement and assess the company’s overall health.

Far too few business owners recognise the importance of good accounting in their success. But make no mistake: it has the power to build or ruin any enterprise.

By hiring a trained outsourced accounting team and using the correct accounting techniques, you can avoid significant missteps that could derail your business.

Let’s get straight to the point

This blog post offers practical accounting strategies for small businesses, emphasising the importance of organised financial management.

It highlights key practices such as maintaining accurate records, managing expenses, and understanding tax obligations.

The post also explores the benefits of using updated accounting software and considering outsourced accounting services.

By implementing these strategies, small business owners can enhance their financial stability, make informed decisions, and drive long-term growth.

Basics of Small Business Accounting

Accounting for a small business requires meticulous record-keeping of all income and expenses and accurately extracting financial data from various business activities. This task is essential for tracking and managing money, especially in the early stages.

Small business accounting helps generate invoices and complete payroll, informing you about your company’s history and performance.

This small business accounting checklist will offer you peace of mind that you’ve covered all your bases and are ready to move on to the next item on your to-do list.

1. Open a Bank Account

After legally registering your business, you’ll need a bank account to store your profits. A separate bank account simplifies tax time and protects your personal assets in the case of bankruptcy, litigation, or audits. Strong financial records can also increase the likelihood of future approvals from creditors and investors.

Note that companies, partnerships, and corporations are required by law to establish a separate business bank account. However, although it is highly recommended for sole traders, a separate account is not legally required for sole traders.

Open a company checking account first, then savings accounts to help you organise your finances and prepare for taxes. For example, set aside a percentage of each paycheck for tax withholding. A good rule of thumb is to set aside 25% of your income, while cautious estimates for high earners might be closer to one-third.

Apply for a business credit card to begin developing credit. Credit is necessary for obtaining future finance. Companies and limited liability companies must use a separate credit card to avoid commingling personal and company assets.

Do your research before approaching a bank about opening an account. Compare fee structures and shop around for business accounts. Most corporate checking accounts charge higher fees than personal checking accounts, so keep track of your expenses.

You’ll need a business name and possibly registration with your state or territory to create a business bank account. Check with your bank for documents you should bring to your appointment.

2. Track Your Expenses

Effective and precise expense tracking is the bedrock of good business bookkeeping. It’s an important step that helps you analyse your company’s progress, create financial statements, track deductible spending, prepare tax returns, and validate your filings.

Create a method for managing receipts and other crucial documents right away. This may be a simple, old-school method (like a filing system), or you can use a service like Shoeboxed.

There are five types of receipts to pay special attention to:

• Meals and Entertainment: Record who attended and the purpose of the meeting.
• Business Trips: Keep receipts for out-of-town business expenses.
• Vehicle Expenses: Track where, when, and why you used the automobile for business.
• Gifts: Note the details of the gift and the event.
• Home Office: Calculate the percentage of your home used for business and apply that percentage to home-related expenses.

Any expense used for personal and commercial purposes must be reported as such. For example, if you have one mobile phone, you can deduct the proportion of time you use it for business.

3. Investigate Import Tax

Depending on your business strategy, you can acquire and import items from other countries. Importing items will almost certainly result in taxes and duties. Learn about importing items and the associated taxes to be prepared.

A duty calculator can help you estimate fees in your own firm and plan for charges if you’re importing items.

4. Establish Sales Tax Procedures

The prospect of paying sales tax can be daunting for new businesses. The rules vary by state and country and can leave room for exceptions. Determine whether your business must pay sales tax and how much money you must collect from customers.

When a store’s annual sales exceed $30,000, it must begin collecting GST/HST. The GST/HST you collect can be submitted in instalments. Selling to overseas clients can be less complicated, as customers from outside Australia are exempt from paying GST/HST in Australian stores.

Sales tax becomes more complicated for international store owners. Consult your accountant for precise details on your state’s or country’s sales tax legislation.

5. Determine Your Tax Obligations

The tax requirements of a company vary based on its legal form. For example, you’ll claim business revenue on your personal tax return if you’re self-employed. Corporations are independent tax entities from their owners and are subject to separate taxation.

Self-employed individuals must withhold taxes from their earnings and pay them to the government. You must pay estimated quarterly taxes if you owe more than $1,000 this year.

6. Calculate Gross Margin

You must understand your production expenses and calculate the gross margin to increase overall revenue.

The gross margin is the amount of money left over after all expenses. This figure indicates the total income after all direct costs of producing the product or service have been deducted.

7. Apply for Funding

A growing business may require external finance, including a line of credit, investors, a small business loan, or a business partner. Brands with ambitious expansion plans frequently require capital to invest in new product development, inventory, employment, and other expenses.

Before you sign off on debt, ensure that the statistics make sense. Calculate the loan’s return on investment by adding up all the costs you need to meet and the estimated additional revenue.

8. Periodically Re-evaluate Your Methods

A basic spreadsheet may suffice when you start, but you’ll want to consider more advanced options like Quickbooks as your business grows. Constantly evaluate how much time you spend on your books and how much that time costs you.

Different Accounting Strategies to Enhance Your Business

Regardless of your business profile, you can manage your company’s finances using straightforward accounting procedures. Finances and accounting are crucial areas to grasp from the start of your business.

A few accounting growth techniques are expansion through profits, accelerating income, creating strategic business alliances, diversifying corporate activities, and optimising present manufacturing operations.

• Your Business Has Outgrown Your Accounting Expertise: As your business expands, you may face financial challenges that necessitate the services of a skilled accountant to maintain records up to date and in compliance with applicable legislation and generally accepted accounting standards (GAAP).
• Your Employees Have Too Much on Their Plate: If your staff has been multitasking to keep up with bookkeeping tasks, outsourcing can let them focus on their core responsibilities again.
• Digital Strategies: Standing out online is critical. Take care of your Google listing, then move on to email marketing, LinkedIn, and Facebook. Accurate Google listings and engaging email marketing are effective ways to keep your audience engaged.
• Raising Your Profile Face to Face: Despite the rise of internet marketing tactics, face-to-face encounters with accountants remain critical. Attending and speaking at local events and organising seminars can significantly improve your firm’s visibility in the community.
• Rather Than Hiring an Accountant, Hire Accounting Staff: When your accounting demands exceed what one person can manage, consider hiring an online bookkeeping service to enhance your accounting approach. Online services provide specialist accounting knowledge at a fraction of the cost of a full team.
• Your Accounting Software Is Outdated: Keeping your accounting software up to date is crucial. Using an online accounting system allows you to keep up with the latest updates as they happen.
• You Need Room to Grow: Whether your business has outgrown its current staff or the market is ready for expansion, scalable accounting software can provide the features and expertise needed to grow with your company.

What Exactly Does It Mean When a Small Business Needs an Accountant?

Accountants provide strategic counsel and imaginative ways to cut costs or boost income. They automate administrative tasks, allowing you to focus on your primary business. Hiring an accountant will enable you to run your firm more clearly and confidently.

A small business accountant does many things, including:

• Form your business
• Help write a business plan
• Audit your cash flow
• Find cost-cutting opportunities
• Advise on business strategy
• Manage debt
• Chase down payments
• Write and submit loan applications
• Plan budgets
• Set up your accounting software
• Manage inventory
• Recommend business tools
• Help open new bank accounts
• Oversee payroll
• Year-end financial reporting
• Prevent audits
• Advise on personal finances

Starting a business might be intimidating, but following these suggestions and methods, you can immediately get your new business’s finances in order.

From choosing the correct bank account to calculating how much money you’ll make per product, these activities will help your business succeed now and in the future.

Conclusion

Effective accounting strategies are essential for the growth and sustainability of any business. By maintaining meticulous records, understanding your financial obligations, and employing the right tools and expertise, you can make informed decisions that drive your business forward. 

Whether you’re just starting or looking to scale, adopting robust accounting practices will help ensure your business’s success and stability in the long term.

The right accounting approach safeguards your financial health and empowers you to seize new opportunities and confidently navigate challenges.

Frequently Asked Questions

How Often Should I Review My Accounting Strategies?

It’s recommended to review your accounting strategies annually, especially before the end of the financial year (June 30 in Australia), or whenever there are changes to tax laws.

Should I Hire An Accountant For My Business?

Yes, a professional accountant can provide expert advice, ensure compliance with ATO regulations, and help develop tailored accounting strategies for your business.

What Is The Instant Asset Write-Off In Australia?

The instant asset write-off allows businesses to immediately deduct the cost of eligible assets up to a specified threshold, reducing taxable income in the current financial year.

How Can Small Businesses Manage Cash Flow Effectively?

• Issue invoices promptly and follow up on payments.
• Use budgeting tools to forecast expenses and income.
• Create an emergency fund for unexpected costs.

Where Can I Find More Information On Australian Accounting Regulations?

Visit the Australian Taxation Office (ATO) website for detailed guidelines on tax laws, deductions, and financial reporting obligations.