When starting a small business, it is essential that you have detailed accounting to review your financial situation.
Proper accounting can allow you to easily view and analyze all of your company’s financial transactions.
These financial transactions include:
- Company Income
- Company Expenses
- Company Assets
- Company Loans
- Company Inventory
Knowing what your resources are is essential. It is very important for you and your investors to have an up-to-date overview of the financial situation of your company at all times.
It is also important for your startup accounting to be done accurately. There are local and federal standards for reporting your company finances.
What Exactly Is Accounting?
According to the Merriam Webster dictionary, accounting is:
“The system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results.”
Basic small business accounting is critical to your company’s overall success. A business plan depends on proper accounting.
Why Is Accounting Important?
Accounting allows your small business to carefully review all of your transactions in-and-out. This creates a financial trail of your financial documents.
This trail is important because it gives your company protection. It can help you prove your company’s worth when trying to secure investors and loans.
Mismanagement of funds, financial losses, and even possible fraud can be avoided with detailed accounting. This protects the safety of your company.
Projections for streamlining your expenses can be made when you have a clear view of your accounting. This can help you make clear improvements in your business planning, steering you towards success and financial health.
Clear records also help you during tax season. Deductions and earnings can be easily viewed by reviewing your financial bookkeeping.
Essential Steps For Small Business Accounting
There are several tried-and-true steps that you can take to ensure that your small business has proper accounting practices in place.
Startup Wars suggests these tips – small business accounting simplified:
1. Open A Bank Account
This may seem obvious, but be sure to open a separate account for just your small business. This will allow you to keep all things separate from your personal finances.
2. Record All Income And Expenses
Choose a method of recording your transactional accounting that works best for you. There are two main methods:
- Cash Basis – Cash basis is an accounting method that records your business revenue and expenses when cash is received or paid out.
- Accrual Basis – Accrual basis is an sba accounting method that records your business revenue or expenses when a transaction occurs.
3. Record Everything
Keep records of all of your financials. Your small business accounting checklist should include all:
- Sales
- Purchases
- Accounts receivable
- Accounts payable
- Inventory
- Payroll
- Loans and Debts
When in doubt, save all accounting records that you have.
4. Regular Review
Take the time to set up a schedule to regularly review all of your accounting and banking records so that you can catch any issues before they develop.
This accounting setup review will also help you to come closer to reaching your business goals. You can do this weekly or bi-weekly to keep a close eye on things. Make sure that all of your balances are checked with banking accounts.
5. Backup For Safety
Keep your accounting efforts safe by keeping both digital and printed records of all of your financial transactions. Create a digital database system of your files on something like google. Stay organized.
By following the above steps, affordable bookkeeping is possible.
Should You Hire An Accountant?
You may be asking:
Do I need an accountant for my small business? I’m not sure that I know how to set up small business accounting.
When it comes to keeping accounting records for your company, you have two choices. You can either hire an accountant or acquire an accounting software system.
Secure an Accountant
An accountant can take the stress out of business finance. They can offer business advice, such as how to calculate expenses in accounting. They also can file your company taxes.
It may be worth the investment to hire a professional to do it for you if your company is growing fast or if you feel unqualified.
Secure a certified accountant through referrals from your small business network. Interview each accountant and ask them what they offer and what their experience is.
Accountants can be paid hourly to make things more affordable for your business. Do your research and find one that you feel is the best fit for your needs.
Acquire Accounting Software
Investing in accounting software can lessen the load of accounting tasks. Accounting software has programs to help you pay yourself and your employees, create invoices for sales, track company charges, and do general bookkeeping.
Reports can be generated at the push of a button to allow you instant access to info.
Some popular accounting software programs are: Netsuite, Quickbooks, Xero, and Wave. (Wave is free)
If you choose to do your own accounting, read up on accounting tips for small business owners. Search up bookkeeping for startups.
You can easily utilize software online to generate general ledgers for small businesses, or to find examples of invoices for self employed.
Ask other startup founders for small business bookkeeping tips, too. You may find that this is easier than you think!
Closing Thoughts
It isn’t easy being a small business founder – the accounting for your company is critical.
Whether you choose to hire an accountant or to do it yourself, your accounting must be consistent. Keep things running smoothly for your business with detailed book keeping.
If you choose to do it on your own, be sure to utilize daily, weekly, and monthly checks to assure your accounting is properly recorded.
Properly file your company taxes on payroll and expenses on a schedule. Utilize suggested IRS scheduling. Accounting software can assist you in generating records and setting schedules.
Always remember, there is no shame in using an expert. Certified accountants can help handle all of your financial concerns, while freeing you up to build your small business into the dream that you always pictured.
Previous Chapter
How To Distribute Equity To Investors
Equity can simply be described as ownership of a company or a part of a company. It is distributed by percentages of shares.
