Did you know that 82% of small businesses fail due to poor cash flow management?
For startups and small businesses, effective accounting isn’t just about compliance—it’s a survival skill.
A lack of proper financial management can lead to cash flow problems, tax issues, and compliance risks.
Whether you’re just starting out or looking to improve your business accounting, following the right accounting tips can help ensure long-term stability.
This blog shares 10 practical business accounting tips to help you succeed.
Set Up A Separate Business Bank Account
Keep your money separate. Mixing personal and business funds creates confusion, especially when tracking income or expenses. Open a dedicated business bank account right away.
This step simplifies your small business accounting and makes tax time easier. A bookkeeping service can help if you’re unsure how to start.
Invest In Accounting Software
Modern accounting software transforms how small businesses manage their finances. These platforms automate data entry, reconcile accounts, and generate financial reports with minimal effort. Popular options include Xero, QuickBooks, and MYOB, each offering features designed specifically for small business accounting.
The right software can save hours of manual work and reduce the likelihood of errors. Most importantly, it provides real-time financial insights that help you make informed business decisions.
Understand Your Financial Statements
Every business owner should be familiar with three key financial statements:
| Statement | Purpose | Key Information |
|---|---|---|
| Balance Sheet | Shows what you own and owe | Assets, liabilities, and equity |
| Income Statement | Shows profitability | Revenue, expenses, and profit/loss |
| Cash Flow Statement | Shows cash movement | Cash inflows and outflows |
These statements provide crucial information about your business’s financial health. The balance sheet offers a snapshot of your financial position, the income statement shows your profitability over time, and the cash flow statement reveals how money moves through your business.
Frame A Reliable Bookkeeping System
Consistent bookkeeping forms the foundation of sound financial management. Whether you handle bookkeeping internally or outsource it, ensure transactions are recorded accurately and promptly.
Execute a system for managing receipts, invoices, and other financial documents. Consider using cloud storage solutions to keep digital copies of all financial records. This practice not only helps during tax time but also provides protection in case of audits.
Monitor Cash Flow Consistently
Cash flow is the lifeblood of any business. Regularly monitoring your cash position helps you anticipate potential shortfalls and take corrective action before problems arise.
Create cash flow projections for the coming months and update them regularly. This practice helps you plan for major expenses, identify seasonal fluctuations, and ensure you have sufficient funds to meet obligations.
Understand Your Tax Obligations
Taxes can’t be ignored. In Australia, startups and small businesses must handle GST, PAYG, and income tax.
Know what applies to you—registering for GST is a must if your turnover hits $75,000. A tax accountant can explain deadlines and rules so you avoid penalties.
Key Tax Obligations Table
Here’s what to watch for:
| Tax Type | Detail |
|---|---|
| GST | Applies if turnover exceeds $75,000 |
| PAYG Withholding | For employee wages |
| Income Tax | Based on yearly profits |
Set Aside Money For Taxes
Tax obligations can surprise unprepared business owners. Establish a dedicated account for tax payments and regularly set aside funds based on your projected tax liability.
Working with a tax accountant familiar with small business regulations can help you understand your obligations and identify potential deductions. This professional guidance often saves more money than the cost of their services.
Streamline Invoicing Processes
Efficient invoicing practices improve cash flow and customer relationships. Send invoices promptly, make payment terms clear, and follow up on overdue accounts.
Consider offering multiple payment options to make it easier for customers to pay. Electronic payment systems can accelerate collections and reduce the time between invoicing and receiving payment.
Seek Professional Accounting Services
It’s possible for you to manage your basic finances as needed internally, but there is definitive value in working with accounting services. Unless your finances are incredibly simple, an accountant typically has more experience to help you work through more complicated financial items, tax planning or tax compliance requirements.
Your accountant is also able to help develop a strategic plan in managing your finances and help you handle decisions that drive long-term growth. It’s often beneficial to try to establish a professional relationship with an accountant who understands your industry or your business actions.
Plan For Significant Expenses
There are times you will need to purchase equipment, possibly improve your facilities or incur other capital expenses that require planning and implementation. You want to determine your capital expenditures and a timeline for real capital outlays.
Plan to build cash reserves for your capex items, rather than relying on your current working capital. This planning also allows you to investigate your financing options and decision-making before you develop cash requirements for outlay programs.
Get Expert Accounting Support For Your Business!
Managing your finances is one of the most important parts of running a successful business. At LTE TAX, our certified tax accountants deliver reliable accounting services for new startups and small businesses. We provide bookkeeping services, tax compliance issues, tax planning, and save you time and money.
