With professional companies like, payroll in Chile, you can run payroll in minutes, not hours. We want to share some basics that will help you to master accounting.
As a small business owner, accounting can be a complicated. You are busy selling to customers and it is tempting to worry about how to account for it later. Without proper accounting practices, you may be exposing your company to working capital shortfalls or tax penalties. Take some time and learn to master this four basics for small business accounting.
Set-up your cloud based accounting
The days of doing your accounting on old software is over. There are numerous cloud-based accounting solutions that you should consider. By moving to the cloud, you can connect your accounting provider to other cloud-based applications, from time-tracking, expense management, and of course, payroll. Since many third-party accounting firms also use the latest software, it is important to pick a software solution that scales as you grow.
Decide on your accounting method
There are two popular accounting methods: Accrual accounting and cash. Depending on the method you choose, you can have a meaningful impact on visibility into your business operations.
- Accrual Accounting: This type of accounting recognizes revenue and expenses when they are earned, regardless of when cash is paid in or out.
- Cash Accounting: Recognizes revenue when cash is received and expenses when cash is paid out. With this method, there is no accounts receivable or payable.
Which one is the best choice? While most small businesses start with cash accounting, as companies grow, they adopt accrual accounting because it monitors a company’s long-term financial health. It also follows accounting’s matching principle.
As your business grows, it is important to make sure you are getting paid. The traditional way of invoicing is to send invoices to your customers by the end of your billing period, typically through a simple mail. As you can imagine, a lot can go wrong in these situations. Your invoice can get lost in the mail and it is time-consuming to follow-up if the customer is late to pay.
To stay on top of your invoices, start invoicing online with a cloud-based accounting provider and collect your payments online as well. An online service can help you:
- Accept payments online
- Automate follow-ups
- Track the work throughout the engagement
- Create an online paper trail for clients and regulators
Track your expenses online
Just as getting cash more quickly into your business it is vital, to track your expenses closely. One particular area where small businesses get tripped up is collecting, recording, and managing receipts.
In the other hand, this is a common mistake made by novice and seasoned entrepreneurs alike. Receipts can become faded and unclear, or lost. The impact on your business can be very meaningful, particularly around tax time. Without proper expense management, you may miss expenses on your tax return, which means less deduction. You may also end up triggering an audit.
Poor expense management means you have poor insight into your company’s spending. Rather than wait until tax day to organize your expenses, you should consider tracking them as close to real-time as possible to manage your company’s operations daily.
Most cloud-based accounting providers have an export and import function for expenses that tie into your credit card and bank accounts. There are also providers, like accounting in chile that help you manage expenses and track reimbursements.