Meta Description: Top 5 easy and practical accounting tips to optimize your small business. Control costs, manage cash flow better and get ahead in the competitive race.

5 Smart Accounting Tips to Save Time & Money for Your Small Businesses

Accounting tips for small business owners are in ever-present demand. Accounting is one of the more overlooked parts of a small business these days. As reported by the SBA, 81% of small businesses do not have any employees. They are either run solo or with a very small core team of entrepreneurs.

Often, the accounting work goes to whoever has time left over from their usual activities. Due to budget constraints, entrepreneurs are often forced to don the mask of manager, accountant, HR, and more. This is where problems begin.

 Another report by GoRemotely, reports that 60% of business owners feel unconfident in their accounting knowledge. If 81% of SMB owners are doing their accounting themselves, and 60% are unconfident in it, something is gravely wrong. 

So here we are, extending a welcoming hand to any entrepreneurs new and old who need accounting help. We’ll go over some of the simplest yet effective accounting tips for small businesses. These tips will also mainly be process changes that won’t cost much if anything. 

We understand all too well the struggles of lifting a small business off the ground. Of course, there is a lot more that can always be improved. This is just to get you started. More advanced changes can come when your business is ready for them. 

5 Game-changing Accounting Tips for Small Businesses in 2024

Open a Business Bank Account

This is the most overlooked but costly mistake you can make as an entrepreneur. A separate bank account for business use is a requirement in 2024. It has been a requirement since banks came to be. 

While it is understandable as a solo entrepreneur to want to use your account, it is the wrong move. Your business needs to be able to show Uncle Sam how much money it is making. Your business expenses operate on different rules from your personal expenses. The tax rules are different for citizens and businesses.  

And even looking past the regulatory problems, it is simply inconvenient not having a business bank account. Your earnings and expenses end up muddled with your personal transactions. Financial statement generation becomes incredibly difficult. Imagine sitting all day sifting out business expenses from your account history. It’s doable, but it is not optimal. All that time and money wasted on a self-made problem. An easily solved one at that. 

If you haven’t already, open a business bank account. Some banks offer special industry-specific accounts as well. Whatever the case, ask around in the market. See what others are using for their business banking needs. Do your research and invest time once for this purpose. 

Once the account is open, you will find things so much more organized. All the business data will be in one place. You will be able to trace where your cash is going. Financial analysis becomes much easier as well. It’s like buying a new notebook for the school year over scribbling on last year’s notebook. 

Leverage AI, Automation and Cloud Accounting

Every list of accounting tips for small businesses is incomplete without mentioning technology. At this point, not using technology can be the downfall of your business. 

Much like how social media has become a requirement for marketing, cloud software is a requirement for accounting. The days of manually managing accounting books are gone. The same is true for Excel sheet accounting. While the latter is still quite popular, it is far from optimal. 

The things software can do, and do better than us now are astounding. With accounts receivable automation, for example, your business can automatically issue collection notices and collect payments.

 Accounts payable automation makes it so all bills are paid automatically before they are due. And this is just the tip of the iceberg. Automated bookkeeping can record transactions in real-time and balance the books. You can even generate financial statements using accounting software these days. 

With AI, things are turned up a notch. While costing more investment, AI can end up taking over the role of an accountant. At least on the manual work side. The critical and strategizing role still needs to be human-driven. But, imagine being able to set up your accounting software to where everything is automated. 

Someone buys a product on your website, for example. The software will register the order, issue an invoice, record the transaction, and store the data. Then, when the time comes to collect payment, it will automatically alert the customer. All you need to do is assume a monitoring role to make sure no errors occur. Besides that, the software can handle all the time-consuming accounting work. 

This may seem like a pointless cost. But is a $25-50 subscription really that big a dent compared to the thousands it helps save?

Start Budgeting 

The most effective accounting tips for small businesses all involve process and mindset changes. As a small business owner, you are likely working on a tight budget. This is where you need to take formal budgeting seriously. 

Budgeting is when you estimate the business’ future expenses based on data and allocate resources appropriately. By budgeting every month, you can get a clear idea of your monthly operational expenses. This opens up the door to cost-cutting, as you start noticing money sinks in the business. Budgeting is also an effective way of keeping yourself on track. Ambitious entrepreneurs may get carried away and lose sight of their goals, for example. It becomes very easy to get tunnel-visioned and not see the big picture. A budget is a good reminder of what the business is trying to achieve. 

Maintain a Rainy-day Fund

Business performance is one big gamble at the end of the day. Some months, you are rolling in money. In other months, tumbleweeds are rolling in the market. There is no way to see these shifts coming, and one bad month can put your cash flow in the red. 

This is where a rainy-day fund comes to the rescue. By setting aside a portion of your earnings for a rainy day, you are doing yourself a huge favor. Think about the pandemic in this instance. The only businesses that came out of it unscathed had funds to fall back on. The businesses without back-up cash had to close up shop. 

So, when crafting your business budget, make sure you set something aside for a rainy day. You never know when you might need it. 

Consider Accounting Staff Augmentation Services

You can follow all the tips we laid out yourself. Or, you can invest in accounting staff augmentation services and have a pro do it for you. Of course, we understand that even that may feel too expensive for some. However, the pros to hiring one are immense. 

In staff augmentation, you are hiring a remote accountant through a firm. The firm is only involved in the administrative capacity. Aside from that, you have direct access to the accountant and onboard them on your team. The main draw is the fact that this is exponentially more affordable than hiring in-house. 

Offshore accounting professionals come at a fraction of the US in-house cost. However, this is not at the expense of skills and talent. Some of the best accounting talent overseas is happy to work at a much lower rate than US equivalents. Thanks to conversion rates, they get a great job package while your business gets to keep its wallet relatively full. 

Conclusion

That does it for our accounting tips for small businesses this year. These are just the start of a much longer journey towards an optimal accounting function. Pick and choose from these whatever suits your small business. We wish you the best on your journey to success!