Accounting is often referred to as “the language of business,” and for good reason: Without understanding its fundamentals and how to keep accurate records of all financial transactions, small businesses put themselves at risk of IRS audits, penalties and fines, cash flow problems and failure. On the flip side, solid know-how and good accounting practices improve the quality of financial data, which leads to better-informed business decisions. But small businesses may struggle to keep up, especially when the accounting function, like many other responsibilities, falls to the small business owner. Armed with the following 18 tips, small business accounting can be more manageable, less time-consuming and yield more useful information.

18 Accounting Hacks to Make Work Simpler

As complicated as accounting can get, there are ways from small businesses to ease the process. The following 18 financial hacks, bucketed into three main categories — organize, plan and automate — can save time and reduce the effort needed to maintain accurate records. They support good accounting hygiene, making the process of “doing the books” simpler and more efficient for resource-constrained small businesses.

Category 1: Organize
Organization is critical across all business functions, but especially in accounting. A few misplaced receipts or poor record-keeping can result in miscalculations that paint an inaccurate picture of the business’s financial well-being. Here are some ways to stay organized.

  1. Keep separate bank accounts: The first step in organizing a company’s finances is to open dedicated bank accounts and credit card accounts to only capture business activity. While this separation from personal finances is a legal requirement for corporations, LLCs and some partnerships, even solopreneurs might find that separation makes life easier.

  2. Categorize expenses: Categorize expenses in a way that makes sense for the business. Most expenses fall into general business categories found on templated charts of accounts, such as travel, entertainment, office supplies and utilities. Most accounting systems allow you to customize the chart of accounts to fit the needs of your business. This simplifies account coding — the process of assigning the correct general ledger code to individual transactions. Ensuring transactions are coded correctly is essential for accurate reporting.

  3. Keep meticulous records: The importance of meticulous record keeping cannot be overstated. The best hack to create a thorough “paper” trail is to document every event as it occurs and never rely solely on memory. For example, take/type notes during conversations with customers, bankers and suppliers, and include “memo” entries on invoices and checks.

  4. Save receipts: It’s important to maintain good-quality supporting documentation, such as receipts, for expenses. Receipts must be easy to read and contain all the information needed to justify expenses, such as amounts paid, descriptions and suppliers. Most tax preparers suggest storing receipts for up to seven years, which can create an unwieldy amount of paper. Digitizing receipts is another hack that makes this process more organized and less cumbersome.

  5. Keep profit & loss (P&L) statements organized: A P&L, also known as an income statement is a useful snapshot of revenue, expenses and earnings. It can help inform better decisions, if kept current and accurate. A helpful hack is to compare the P&L statements from various fiscal periods to uncover potential anomalies, omissions and trends.

Category 2: Plan
Even with the best software in place, accounting is anything but a “set it and forget it” activity. Among its many pieces to plan for:

  1. Reconcile accounts at least weekly: Comparing general ledger account balances to outside sources on a regular basis helps ensure your books are accurate and up to date, without requiring herculean effort. Weekly cash/bank reconciliation is important for managing cash flow and monitoring for fraud. Weekly reconciliation of accounts receivable/cash application — matching customers’ invoices to their corresponding invoices — is another way to keep tabs on cash flow and customer payment status.

  2. Pay business taxes: Paying taxes on time reduces the risk of costly fines and penalties, which is especially important for small businesses that count every dollar. Business taxes include income, sales, payroll, self-employment and ad valorem taxes. Take care when paying estimated taxes as this reduces the potential for late fees, and helps avoid unexpected costs at the eleventh-hour crunch.

  3. Set measurable accounting goals: This tip has two components. First, set goals for daily accounting tasks to ensure they’re completed within an acceptable time frame; when tasks accumulate, they often take more time to complete. Second, establish longer-term goals for the overall accounting function and its deliverables. Examples include identifying relevant deadlines, such as for tax or payroll filings, and establishing milestones needed to meet them. It’s also important to schedule specific times for financial analysis and monitoring key performance indicators (KPIs), such as revenue, working capital and profit margin ratio.

  4. Track deadlines: Accounting is a deadline-driven function, which may be especially challenging for small business owners who juggle multiple priorities. Plot out and organize short-term, mid-term and longer-term deadlines, since missing them can prompt penalties, fines and operational complications. Consider deadlines for weekly payroll processing, the monthly financial close, quarterly loan compliance and income taxes, among others.

  5. Manage cash flow: It’s a well-studied fact that cash flow issues are one of the primary reasons small businesses fail, so employing tips or hacks to help manage cash flow is critical. Automated invoicing and receivable management (hacks 11 and 18) help increase cash flow into the business. Similarly, careful management of accounts payable and timing of disbursements help balance cash outflows from the business. Finally, prudent use of credit can help fill unavoidable gaps in cash flow.

  6. Manage receivables: Actively managing accounts receivable is a high priority for any size business, but especially for small businesses that tend to be more susceptible to cash flow swings. A helpful hack is to review open accounts receivable on a regular basis (e.g., daily or weekly) to quickly identify customer accounts that are or about to become past due, since the likelihood of successful collection declines as time passes. In the same spirit, it’s important to apply customer payments to open receivables on a timely basis to maintain good customer records and relationships.

  7. Use a virtual assistant: Small business owners wear many hats as they manage their businesses. However, it’s important for them to bring on help when required. Some small businesses engage virtual assistants, a less expensive alternative to hiring a full-time bookkeeper. Handing off day-to-day accounting tasks to a virtual assistant and adopting more of an oversight role can free up time for endeavors better handled by the company owner.

  8. Forecast the future: Use the generated financial information and take the time to think about the company’s future. Set budgets and performance goals, and create financial and operations forecasts that will prepare the organization for the future.

Category 3: Automate
Automating many accounting and financial processes frees small business owners and staff from manual tasks so they can focus on growing the business. Automation also reduces human errors and increases productivity, among other benefits. Following are ways to introduce automation into your accounting process — if you haven’t already.

  1. Link bank accounts and credit cards: Linking commercial bank and credit card accounts to you’re general ledger save time during the reconciliation process. It also helps small business owners keep track of their cash position. And automation greatly reduces the chance of a data-entry errors.

  2. Avoid cash transactions: In general, doing business with cash adds to the accounting burden. Small businesses in particular need to put extra accounting controls in place to safeguard their cash. In addition, U.S. banks and the IRS scrutinize cash transactions over $10,000 to catch illegal activity; they also require additional regulatory filings, such as IRS form 8300. Instead of cash transactions, use automated digital payment methods whenever possible.

  3. Invest in accounting software: Investing in automated accounting software is the most basic of accounting hacks — but choosing the right solution, with the right features, for your business is an even more valuable tip. Identify software that can add features and functionality, often in the form of modules, that may become necessary as the business grows and requires new capabilities. Equally important, protect your software investment with great training and customer support.

  4. Join the cloud: Cloud-based accounting software, where services are delivered over the internet, provides many advantages for small businesses — especially those that don’t have the budget to purchase their own on-premises servers and other IT infrastructure. Among the many benefits, a cloud accounting provider handles all software installation, maintenance and upgrades. Cloud-based systems can also be accessed 24/7 through a web browser or mobile app, allowing business leaders to manage company finances virtually. An added plus is that cloud providers often provide training and technical support for their customers.

  5. Automate invoicing: Good invoicing practices on the front end of the billing process help make the cash collection process easier and less time-consuming on the back end. Automatically creating and sending invoices streamlines what has historically been a time-consuming manual process. Choose accounting software that includes integrated billing, ideally with customizable invoice templates and electronic delivery capability. This hack reduces the potential for manual error, eliminates paper-filing work and, when using cloud-based billing software, allows easier access to accounts because information is no longer tethered to physical filing cabinets. Additionally, digitally delivered invoices get to customers faster than notices sent by snail mail, hopefully resulting in faster payments.

Small Business Accounting Hacks

Keep separate bank accounts Complete reconciliation weekly Link bank accounts and credit cards to general ledger
Categorize expenses Pay business taxes Invest in accounting software
Keep meticulous records Set measurable accounting goals Avoid cash transactions
Save receipts Track deadlines Join the cloud
Keep profit & loss (P&L) statements organized  Manage cash flow Automate invoicing 
  Manage receivables  
  Use a virtual assistant  
  Forecast the future  
Small business accounting hacks fall into three primary categories: organize, plan and automate.

The 18 small business accounting tips and hacks listed above can help increase effectiveness and efficiency, allowing business owners to focus on the positive benefits of accounting, rather than the potential pitfalls. Taking steps to adopt automation, improve organization and planning are the ways to support this overall business and accounting goal.

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Small Business Accounting Hacks FAQs

What are the 4 types of accounting?

Four types of accounting are corporate, government, public and forensic. Corporate accounting is the preparation of books and records, financial statements and external filings for most businesses. Government accounting applies to federal, state and municipal entities, and has unique rules and methods. Public accounting comprises an industry of experts who help clients generate accurate accounting information, such as financial statements and external regulatory filings. Forensic accounting is a branch of accounting that helps recover, re-create or investigate accounting data.

What is the easiest accounting software to use?

The easiest accounting software to use is the one that best fits the current needs of a business and can scale as the business grows. Cloud accounting solutions tend to be the easiest to set up, maintain, secure and scale.

How can I make bookkeeping easier?

Tips and hacks that help make bookkeeping easier fall into three categories: automation, organization and planning. The single most impactful way to make bookkeeping easier is by investing in accounting software.

How do you ace accounting?

While bookkeeping does not require a degree in accounting, becoming an accountant requires a specialized training. A certified public accountant (CPA) must also pass a multipart licensing exam, accumulate certified work experience and take continuing professional education courses. Acing accounting classes requires a high level of effort, attention to detail and good study skills.