Business & Tech

15 Accounting Tips for Your Small Business

Bryn Mawr resident and CPA Chris Hegarty put together a list of tips for small business owners to keep in mind when starting a business.

Bryn Mawr resident Chris Hegarty, who's been an accountant for more than 20 years, said he's seen people make their fair share of mistakes when starting small businesses.

So, he put together a list of factors for people to think about and how to avoid the common pitfalls of new business owners.

“I put it together over the holidays just in response to people in my network thinking of starting their own businesses, and who have started their own businesses," Hegarty said. "Because you only start a new business once."

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He said he's shown the list to some of his clients, as he is a CPA at the Philadelphia-based firm Citrin Cooperman. Hegarty said some of the tips are just common sense, but he said all the tips are accounting-focused because that's his background.

"No matter how big or small the business is, there’s always some level of accounting. You need to have some system of control so that you can protect yourself," Hegarty said. "Some people start with an idea, but they don’t necessarily think about it from an accounting perspective or internal controls. You have people who are writing your checks for you, and you just need to set up some safeguards is all."

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Here are Hegarty's suggestions:

1. Make sure that the person who makes the bank deposits and pays the bills is not the person who reconciles your bank account statements.

2. Be sure that you understand cash inflows and outflows of the business.

3. Plan a budget BEFORE you start a small business.  As Winston Churchill said, “When you fail to plan, you plan to fail.”

4. Avoid hiring or doing business with friends and family because doing so can present some challenges.  

5. If you decide to hire friends and family and come to regret the decision (See #4 above), it is essential to act swiftly to reconcile the situation.

6. Invest in a good accountant to help navigate tax filings.

7. Remit payroll taxes to the government in a timely fashion. Failure to do so can create a major headache, or earn you time in a Federal facility.  Avoid at all costs.

8. Make sure your business doesn’t depend on a small number of major clients to stay afloat.

9. Diversify accounts and clients in case the industry that your business specializes in runs into trouble.

10.  Avoid relying too heavily on a small number of suppliers. Your supply chain depends on the suppliers, so you never want to hang your hat on just one or two.

11.  No business is too small to implement simple internal controls and segregate duties. Putting these types of systems in place ensures that there is an internal check on all transactions.

12.  Delegate routine duties. Have someone open all of the mail delivered to your company. Be sure to personally review and sign off on bank reconciliations each month.

13.  Make your life easier by using technology and software such as QuickBooks, electronic payments and collections, and scanning capabilities.

14.  Build relationships with vendors. Some vendors will not negotiate terms. Others may be willing to negotiate in order to keep or expand your business (see #9 above).

15.  Ensure top-quality client service in your business.  Consumers on average will be five times more likely to tell others about a negative experience with your company than a positive one. Get people talking for the right reasons.

And a bonus tip from Hegarty:

Finally, people do what you “inspect,” not what you “expect.”  If your employees know that someone is going to double check their work, they will make sure to do it correctly and on time.  If you “expect” people to do the right thing without inspection, you will find that some people tend to put off these tasks. This is how people fall behind in their work and problems are not uncovered and corrected in a timely manner.


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