6 Accounting Tips to Make Your Wallet (and Brain) Happy

So, you want to get the best tips on accounting?

You dream of numbers, but only when it’s a profit (Who dreams of losses, right?)

You’re ready to build a BIG team and give them all the perks and benefits they can dream of.

You also want to buy some cutting-edge software to streamline your workflows. 

Every entrepreneur shares that dream, or should I say wishlist.

But only a few are able to turn that wishlist into reality.

Why? Because they fail at managing money.

They can’t handle it when it’s overflowing like a river or stretch it when needed.

But don’t worry! I don’t want to see you fail, and our doola community definitely doesn’t want to see you fail, either.

So here you go! In this blog, I’ll share the top 6 powerful accounting tips that will take your profits to a whole new level (and yes, I mean higher).

How Can Bad Bookkeeping Hurt Your Small Business?

How Does Bad Bookkeeping Can Hurt Your Small Business

Okay, let’s talk about the elephant in the room: bookkeeping in small business setups. I know it’s not the most glamorous part of running a business, but it’s very important.

So, what exactly is small business accounting

Well, it’s all about keeping tabs on your cash flow — money coming in, money going out — and summarizing that info in monthly financial statements. That makes sense, right?

Now, as a small business owner, you’re already probably juggling the day-to-day bookkeeping tasks. For example:

✅ Creating and sending invoices to clients (and praying they pay on time)

✅ Tracking expenses and profits (or at least trying to find those elusive profits)

✅ Recording customer receipts and filing them away (somewhere safe…hopefully)

✅ Keeping track of every vendor payment (because vendors have memories like elephants)

✅ Preparing financial statements and reports with a bit of help from your trusty accountant

This accounting task list will probably never stop growing.

And as your business grows, you’ll find yourself wasting hours sifting through endless Excel spreadsheets hunting for that one rogue decimal point. Not a fun job at all!

But you know what hurts the most? Even after all that work, your balance sheet might still be off. That mysterious $250 discrepancy in your logbooks? It could be from one tiny journal entry you mistyped or a prepayment you planned to account for but forgot after a small nap 🤭. 

Be careful; these little accounting gremlins can wreak havoc on your small business and keep you from growing.

Expensive and Brutal Fines for Messing Up With Your Tax Filing

Think you can skip filing taxes because you’re a small business? Think again!

Not filing your taxes can lead to serious trouble. The IRS can charge you fines and penalties. 

These aren’t just small fees — they can add up quickly and severely dent your cash flow.

Here’s what can happen:

Late Filing Penalties: You’ll be charged a percentage of what you owe for each month your return is late.

Late Payment Penalties: If you don’t pay your taxes on time, you’ll incur additional penalties and interest on the unpaid amount.

Loss of Tax Refund: If you’re due a refund and don’t file your return, you’ll forfeit that money after a certain period.

Legal Trouble: In extreme cases, not filing taxes can lead to legal action, including hefty fines or jail time.

No Tabs On Cash Inflow and Outflow

If you aren’t monitoring your cash inflow and outflow well, you might find yourself in a tight spot where you might not have enough cash to pay your bills and even small expenses.

This can lead to some pretty serious issues:

Strained Relationships

Not paying your suppliers and business partners on time can make things awkward.

Additional Costs

Late payments often come with extra fees and interest, which can add up faster than your collection of unread emails.

Operational Hiccups

Keeping the day-to-day operations running smoothly without sufficient cash flow becomes a challenge.

Missed Opportunities

You might have to pass on growth opportunities or sweet investments because your wallet is empty. And nobody wants that.

Extremely Poor Business Decisions

Now, who am I to scare you? But bad bookkeeping isn’t just a paperwork nightmare — it’s a decision-making disaster waiting to happen. 

Here’s how it can snowball into a disaster:

Misinformed Decisions

When your financial records are a mess, it’s like trying to drive in a forest with a broken GPS. You might think you’re heading to Profit Town, but you could end up in Bankruptcyville.

Overestimating Funds

Without accurate books, you might believe you have more cash than you actually do. In simple words, this can lead to overspending and financial trouble. Do we need to explain this further? I guess not. 

Underestimating Expenses

Conversely, you could miss out on necessary investments because you think you’re broke. No new marketing campaign, no upgraded equipment, just more of the same old, same old. This is dangerous. Trust me.

The Dead Sea of Opportunities

When your financial data is all over the place, you might miss out on opportunities to expand or improve your business because you don’t have the correct information at your fingertips.

6 Accounting Tips to Make Your Wallet (and Brain) Happy

6 Accounting Tips to Make Your Wallet (and Brain) Happy

Okay, I won’t lie here. 

The tips we’re about to drop are geared toward small businesses, but honestly, any business can use them to dodge those dreaded bookkeeping nightmares.

That’s why I’ve taken some creative liberty and tweaked the title from “Six Accounting Tips for Small Businesses” to “Six Accounting Tips to Make Your Wallet (and Brain) Happy”. 

After all, a fat wallet equals a happy brain. Simple math, right?

Okay, enough with the chatter! Let’s dive into these tips and get your finances in tip-top shape.

1. Create A Fence: Separate Business and Personal Expenses

First up on the docket: the golden rule of small business accounting—keep your business and personal expenses separate. This is Bookkeeping 101, folks. 

Now, you wouldn’t toss your gym clothes in with your office attire, would you? First, it’s a fashion faux pas. Second, it’s just plain messy. You get the idea, right? The same logic applies here.

By keeping your finances separate, you’ll have a clear picture of your business’s financial health and see precisely where your money is going, making your financial records cleaner and more accurate. 

Plus, it makes tax time way less painful. Think of it as having two distinct wardrobes — one for work, one for play. You wouldn’t wear a suit to the gym, would you? Well, maybe you would, but let’s hope not!

So, what’s the first step?

Register your business as a separate legal entity. This is crucial for separating your personal and business finances legally.

Open a business bank account. Use this account for all your business transactions — income, expenses, everything. 

2. Track Every Business Expense. Yes, Even That Chocolate

Every penny is hard-earned, so you’ll need to track every single business expense. Yes, every penny counts. 

You don’t want to end up wondering where all the money went after those tiny birthday treats to your employees.

In addition, tracking expenses helps you cut unnecessary costs and gives you a more apparent profit margin. Plus, it saves you from those nasty surprises when big expenses suddenly pop up, like uninvited guests at a party.

3. Watch Out for Your Liabilities

It is a pretty simple tip, but it’s one of those things that can easily slip through the cracks if you’re not careful.

In simple words, you must separate your loans and borrowed funds from your current assets. Know what you own (assets) and owe (liabilities). 

You don’t want to think you’re swimming in cash when half of it belongs to creditors. 

Let’s break it down so you understand it better.

Assets: Think cash, equipment, inventory, and even that fancy office chair you love.

Liabilities include wages, debts, taxes, and bills. Imagine this as a list of people waiting to be paid.

Equity: This is what’s left after subtracting liabilities from assets. It’s what you own for free.

Clear enough?

And, if there’s any confusion in the future. Freeze this accounting equation in your mind:)

Assets = Liabilities + Equity

Short-term vs. Long-term Liabilities: Keep an eye on the difference.

Short-term liabilities are debts or obligations due within a year (like accounts payable and short-term loans), while long-term liabilities are due in more than a year (like mortgages and long-term loans). Knowing the difference helps with planning and cash flow management.

How to keep track of liabilities?

✅ Categorize Correctly: Make sure loans and borrowed funds are kept separate from current assets.

✅ Use Accounting Software: Good accounting software helps you easily track and categorize your financial transactions. 

4. Figure Out Your Minimum Monthly Income

You need to know how much cash you must make each month to cover all your expenses. Have you heard the saying, “Cut your coat according to your clothes”? 

It’s the same deal here. Make plans based on what you have, not what you wish to have.

This should be your new money-making ritual: Set a minimum amount for each day and ensure you don’t exceed it. Unless, of course, there’s a medical emergency with your staff. We’re not monsters, after all.

A few simple tricks to keep your finances in check:

Write down every single expense. Yes, even that daily coffee or those office supplies. Every penny counts!

Add your daily expenses to your fixed monthly costs. Fixed costs include rent, salaries, insurance, and subscriptions. So, add that up as well. This will give you your average monthly expense.

Your minimum monthly income should cover all these expenses. But don’t forget to add a little extra for those unexpected costs. Life loves to throw curveballs.

Pro Tip: Build a Safety Net. Aim to make more than your minimum target and save the extra. This cushion will help you handle slow months, invest in growth, or cover emergencies without stress.

5. Predict Your Future Projections

Imagine driving a car blindfolded. Foolish and dangerous, right?

Well, that’s exactly what running your business without financial projections is like. You don’t want to crash and burn.

To keep your business not just in a good state but in a great one, you need to know what’s coming around the corner — whether it’s smooth sailing or potholes. 

In other words, you should focus on financial projections.

Projections are like your business’s crystal ball. They help you see the future through financial data and trends, guiding you to make smarter decisions.

Here’s how to create that crystal ball:

Look at the Past

Start by digging into your financial history. What were your highs and lows? Did you have a killer month or a drought season? Use this data as your launchpad. Past performance is an excellent indicator of future trends. 

Make Educated Guesses

Yes, you’ll have to do some crystal ball gazing here. Based on trends, estimate future revenues and expenses. Will sales skyrocket or dip? Are market prices about to balloon? Use realistic assumptions based on market conditions, economic forecasts, and business plans. 

Plan for Scenarios

Craft different scenarios — best, worst, and most likely. 

Best Case: What happens if everything goes right? When sales are through the roof, and costs are minimal.

Worst Case: What if everything goes wrong? Sales slump, costs rise, and you’re left scrambling.

Most Likely: What’s the middle ground? Perhaps it is going to be a realistic forecast based on current trends.

You can also use financial software to create and manage your projections. These tools can help you automate calculations and visualize data, making the process smoother and more accurate.

6. Don’t Be Scared of Tax Filing

Let’s talk about everyone’s favorite season — tax season. Just kidding, it’s probably not anyone’s favorite, but it’s crucial.

If you’ve followed my first tip about separating business expenses, you’ve already made your life a bit easier. Pat yourself on the back! But there’s more to it than just that.

Depending on your country and the nature of your business, you will have different tax obligations. For instance, in Singapore, you’ve got GST (Goods and Services Tax). 

In the US, there’s federal income tax, state tax, sales tax, and maybe a few others, depending on where you are and what you’re doing.

Understanding your tax obligations ensures you don’t miss any important deadlines or payments. Missing these can lead to hefty fines and penalties; no one wants that.

Here’s how to prepare:

Know Your Deadlines

Mark all the necessary tax dates on your calendar. Quarterly taxes, annual returns, VAT/GST submissions — ensure you know when everything is due. Set reminders if you have to.

Keep Detailed Records

Throughout the year, keep meticulous records of all your income and expenses. Use accounting software to categorize and track everything. Come tax season, you’ll have everything at your fingertips.

Seek Professional Advice

Taxes can be complicated. It’s often worth consulting with a tax professional who understands the specific requirements of your business and country. They can help you navigate the complexities and ensure you’re compliant.

Use Tax Compliant Software

Invest in accounting software that’s compliant with your country’s tax regulations. This software can automate much of the process, reducing errors and saving you a ton of time.

Bonus Tip: Set aside money for taxes throughout the year. Instead of scrambling to create a large sum at tax time, set aside a percentage of your income each month. This way, you’ll be prepared, and your cash flow won’t take a sudden hit.

Make Your Business’s Financial Management Simpler and Smarter With doola

When to Choose doola

Ready to take the stress out of small business accounting? Book your free consultation with doola.

We make managing your business finances feel like a walk in the park.

Here’s how we can help:

Easy Setup: No more wrestling with paperwork and operating agreements.  doola gets your business registered and set up correctly from day one. It’s simple and hassle-free. 

Comprehensive Services: We’re not just about accounting. We handle bookkeeping, EIN, compliance, and everything in between. 

Expert Guidance: Need help? We’re ready to guide you through the complex world of business finance.

Just sign up for a free doola consultation today

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