20 Expert Accounting Tips Every Small Business Owner Should Know

20 Expert Accounting Tips Every Small Business Owner Should Know

Managing your small business’s finances isn’t just about crunching numbers—it’s about making data-driven decisions that keep your business healthy and positioned for growth. The right accounting strategies can streamline cash flow management, optimize tax savings and bring a new level of efficiency to your daily operations.

Here, 20 Forbes Finance Council members share the accounting tips they’ve found most impactful, from simplifying cash flow processes to maximizing tax efficiencies. By focusing on these practices, you can manage finances more confidently and spend less time on accounting tasks that take you away from your core business.

1. Explore QSBS Benefits For Tax Savings

For leaders, familiarize yourself early on with Section 1202 of the code regarding Qualified Small Business Stock (QSBS), particularly where LLCs can convert to C Corporations using their fair market value as the basis in the new C Corp. If you meet the requirements, including a five-year holding period, you could exclude up to 10 times your basis from taxes on an exit. Talk to your tax attorney! – Peyton Carr, Keystone Global Partners

2. Prioritize Cash Flow Forecasting

Many small businesses fail due to cash flow issues, not profitability. Regularly projecting your cash flow allows you to anticipate shortfalls and surpluses. By staying ahead of potential liquidity issues, you can ensure you have the funds needed for expenses, growth or unexpected challenges. – Trixy Castro, TRX Capital

3. Separate Your Personal And Business Expenses

Keep your books regularly updated and reviewed to monitor any challenges. Develop metrics to monitor cash flow and create PnL by-products as the business grows to ensure you can monitor and control the costs and margins for specific products and regions, which eventually helps cash flows. – Junaid Mahesar, Alef Education

4. Monitor Cash Flow To Stay Afloat

For any small business, whether it’s an SMB or an early-stage startup, lines of credit are generally not easily accessible, and you need cash to operate. Hence, “follow the money” and closely watch the cash flow statement. The world is littered with small businesses that were making good money on paper but because they did not get paid on time, they ran out of cash and closed down. – Mitja Sadar, SKROL Capital Inc.

5. Reassess Your Forecast Quarterly

Periodic forecasting is a superpower that can help small business leaders optimize all aspects of their business. Leaders should use modern FP&A tools to create a budget at the start of the year and reforecast the business every quarter to assess how the business is performing and what adjustments it should make along the way. – Abhishek Nanda, Revalize


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6. Issue Founder Shares Early To Minimize Taxes

As a founder, it’s crucial to issue stocks to yourself and fully pay the capital. Many founders overlook this, which could lead to a significant tax bill if the stock value increases. It’s best to pay the capital when the stock is valued near zero (e.g., a par value of $0.0001). For instance, if you issue 8 million shares at $0.0001 per share, you would pay $800. This helps ensure compliance and minimize taxes. – Tomas Milar, Eqvista Inc.

7. Implement A Cash Flow Management System

One accounting tip I find incredibly helpful for small business leaders is to establish a robust cash flow management system early on. Many entrepreneurs focus on profitability, which is important, but cash flow is the lifeblood of any business. Ensuring that you have a clear understanding of your cash inflows and outflows can be the difference between a thriving business and a cash crisis. – Alexander Ronzino, Rework Capital LLC

8. Track Expenses In Real Time

Use accounting software or apps to log every expense as it occurs. This prevents small costs from being overlooked, ensures accurate cash flow management and allows for better budgeting. Staying on top of expenses also helps identify tax-deductible items, ultimately saving money. – Ravi Gullapalli, Fastra Investments

9. Focus On Unit-Level Profit Drivers

Understanding unit-level economics is essential. It’s about analyzing the performance of individual units or products within your business. This approach lets you pinpoint what drives profitability and where costs may increase unnecessarily. By focusing on these metrics, leaders can decide where to scale, cut back and negotiate with suppliers or partners. – Patrick Galleher, Boxwood Partners

10. Know Your Numbers

Don’t leave it all to the finance expert. The numbers tell a story, and you, as the business leader, must be able to use the numbers to craft the narrative of your business. – Odiri Oginni, United Capital Asset Management Limited

11. Use Digital Tools To Monitor Financial Health

Effective cash flow management is key to running any business. With digital tools, leaders can have a snapshot of their business’s financial health and identify areas where there could be shortfalls or surpluses. SBOs will benefit from maintaining a forecast of expected cash inflows and outflows, revisiting projections and challenging assumptions with real-time data to reduce risk and maximize ROI. – Jenn Flynn, Small Business Bank at Capital One

12. Understand Your Tax Responsibilities

It is essential for small businesses to understand all their tax and informational filing responsibilities (income, sales, foreign, Forms 1099, FBARs and so on). Taxpayers should ensure they set up books and records that properly track all information necessary to address required filings on time. This will help avoid lost time addressing notices and the cost of potential penalties. – Robbin Caruso, Prager Metis CPAs, LLC

13. Have A Separate Credit Card For Business Expenses

I use a particular business credit card for all business expenses for ease of accounting and pay it off every month. Then, at the end of the year, I simply print the detailed annual statement to give to my accountant. It makes it super easy for tax purposes, and the unlimited cash back helps fund business growth while continued use helps build and solidify the business credit profile. – Mike Zaino, RFC®, The Zaino Group

14. Understand Your Finances

Analyzing net sales, gross margins and contribution margins while measuring SKU, channel and customer performance reveals success drivers and vulnerabilities, highlighting areas for diversification in the supply chain, channel or customer base. This helps identify where to invest and drives informed strategic decisions for long-term success. – Brent Lessey, Anchin

15. Regularly Review Cash Flow Statements

By monitoring inflows and outflows, small business leaders can spot trends, anticipate shortages and make informed decisions on budgeting or investments. This proactive approach helps maintain liquidity, avoid financial surprises and ensure the business stays on track with its financial goals. – Jared Weitz, United Capital Source Inc.

16. Use Accounting Systems Year-Round

Accounting systems should be utilized in real-time, not just at year-end for taxes. One’s chart of accounts, which folds into one’s financial statements, should be carefully constructed to get quick overviews of the comparative business performance while allowing for various levels of detail to be easily accessed. – E. Martin Davidoff, Prager Metis CPAs, LLC

17. Implement Accrual Accounting Early

Accrual accounting offers a more accurate financial picture by recognizing revenue and expenses when they occur. This helps leaders better understand cash flow and profitability. – Richard Polgar, CFG Merchant Solutions

18. Employ Family Members For Tax Benefits

Small businesses may employ their children part-time in roles such as modeling for marketing materials. This provides a tax deduction to the business and tax-free income for the child (up to a certain limit), which can then be invested into tax-free investment accounts such as a Roth IRA. This is an efficient way to improve the bottom line and maintain greater control over capital. – Ryan Loynd, BrightGuide Financial

19. Look Beyond Profits To Avoid Cash Issues

Pay attention to cash flow! Many business owners look at profits but don’t realize that tying up money in accounts receivable, inventory or other illiquid assets can lead to cash flow problems that can cause even a high-growth business with positive net income to fail. – Keith Costello, Locality Bank

20. Align Accounting With Business Goals

Start by understanding future activities and ensuring proper categorization in the general ledger. For example, recording software development expenses as investments instead of professional costs allows you to capitalize on them, which can enhance asset valuation, crucial for future IPO or M&A considerations. – Ivan Lunegov, Olimp Capital Partners

The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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