As an entrepreneur, you might be comfortable with several aspects of your business such as marketing, sales, or product development. But when it comes to accounting, unless you have an accounting background, you may find it difficult to deal with it.
Here are five effective tips which would be helpful for every entrepreneur:
1) Keep track of your books of accounts:
As an entrepreneur, you might be inclined to outsource accounting services in India and avoid having anything to do with accounting. However, it is highly recommended that you review your books once a week or once a fortnight. You can begin by preparing a checklist of the essentials of accounts that you should be familiar with. You could also have review meetings with your accountant to get a better understanding of accounting terms as well as the books of accounts. This would ensure that you get a better understanding of accounting practices and avoid getting misled.
Pro-tip: You could outsource accounting and financial services to a firm that provides accounting and bookkeeping services. Such a firm is likely to have a monthly review with you to help you track your books of accounts.
2) Get the right software platform:
Accounting software platforms have become indispensable today. These platforms will not only record your accounting and book-keeping details but may also offer vital insights. These platforms also drastically reduce the chances of human error. The most popular account software in India is Tally which has a market share of 75%. Since accountants have been using this software for decades, this software platform can be used by literally any accountant. However, there are quite a few other accounting software platforms in the market such as Quickbooks, Zoho Books, etc are also gaining popularity. Some of these platforms may have unique or additional features. For example, Quickbooks has a feature that enables you to download your bank account statements through the software itself. Therefore, you wouldn’t have to download bank account statements and manually enter the details.
Pro tip: Don’t have preconceived notions about any particular software platform. Your accountant and you should spend some time reviewing multiple accounting platforms before choosing the most suitable one. If you have outsourced accounting services to a firm, you can rely on their expertise in choosing the right platform.
3) Monitor your cash Flow:
Quite often, entrepreneurs wonder “Where did all that cash go”? If you are one of them, it may mean that you aren’t monitoring your cash flow. As a business owner, you should be aware of your monthly and annual cash flows. This would help you decide whether to expand your business or consolidate it. While monitoring your cash flow, you will be aware of the incoming payments and outgoing expenses. This would help you determine which clients are delaying payments or which vendor payments could be delayed.
Pro-tip: Use a spreadsheet to track the incoming payments and outgoing payments every quarter. You could design your own format. This should help you plan your expenses.
4) Be aware of the different types of taxes:
The director of a company may have to pay personal income tax as well as the company’s income tax. Whereas a proprietor would have to only pay income tax. And, of course, all the entities have to pay GST. As a business owner, you should not only be aware of the different types of taxes that you have to pay but also estimate your monthly tax obligations.
Pro tip: Spend some time with your accountant or outsourced accounting services partner to understand the different tax obligations that you would have to incur.
5) Maintain soft copies of your invoices and expense bills:
During the new normal, many business owners would have been forced to go digital. Apart from providing hard copies of invoices and expense bills, you could also maintain soft copies of the same. You can share access to these soft copies with your accountant. It would also become convenient for your accountant to review these soft copies. In case any hard copy of an invoice or expense bill gets lost, you can rely on the soft copies of the same.
Pro tip: As soon as you raise an invoice or receive a bill, scan it and upload the details on your storage drive.
Finally, it is important for an entrepreneur to understand that the accountant can be a strategic partner in their business. An accountant can offer insights to optimize your operations, discover any potential issues in your business and help you generate a better return on investment from your business. Alternatively, a business owner may also wish to approach top accounting firms and take their assistance.
