Basic Accounting For Small Businesses

Basic Accounting For Small Businesses – As a business owner, it is your responsibility to keep your business books up to date. Having up-to-date and accurate accounting records will keep your company on track for success. But if you fail to focus on your accounting tasks, your business will quickly sink before it can grow.

To make sure your books are accurate from the moment your company was born, use these seven bookkeeping tips.

Basic Accounting For Small Businesses

Commingling expenses may not seem like a bad idea at first, but it can quickly become a headache for your small business.

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From the start, you should set up a business bank account to keep personal and business expenses separate.

Your business can also benefit from setting up a business bank account. A business bank account helps you:

In some cases, splitting funds isn’t something your business can refuse. If your business is an LLC or corporation, you must open a separate account for the business.

It’s no secret that automation can be a lifesaver for small business owners. The more you automate, the more time you have for your business.

Basic Accounting For Small Business

To streamline your accounting responsibilities, consider automating your accounting process with accounting software. With software, you can say goodbye to spreadsheets and manually crunching numbers.

When you’re searching for accounting software, look at things like storage, accessibility, and security. Create a list of must-haves for your business, such as specific features, pricing, and reports.

Don’t rush to buy software. Do your homework to find out which software is the best fit for you and your business needs.

Managing and keeping accounting records, such as business invoices, receipts and expenses, can make or break your business books. If you fail to keep accurate records, your company’s finances will suffer.

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If you’re a fan of keeping paper records, store them in a safe and secure place (eg, a locked filing cabinet). And be sure to keep your paper accounting records organized using different labels and sorting strategies (eg, chronologically).

If you’re not a fan of paper records, go electronic instead. Keep paperless versions of accounting information safe on your devices or in the cloud.

To ensure you protect your accounting records, consider keeping both a paper and a paperless version. This way you have a backup in case the accounting information is destroyed, misplaced or lost.

As a busy business owner, it’s easy to lose track of time and miss deadlines. Next thing you know, another month or year has passed.

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Try setting reminders to avoid deadlines and have your books ready for tax season. Add business tax return due dates and other reminders to your calendar to ensure you don’t miss upcoming deadlines. You can use a digital calendar (eg Google Calendar) to track important dates and set yourself reminders.

Plan ahead and set aside time and money for your business taxes. That way, you can pay your tax obligations on time and avoid overdue penalties.

? If so, you probably remember them leaving breadcrumbs to go back home. Just like leaving breadcrumbs, an audit trail helps you track your steps in accounting.

An audit trail is a set of documents that backs up the transactions you have recorded in your books. Your trace helps you track transactions and verify that they are correct. Audit trail documents include items such as purchase orders, invoices, and estimates.

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Creating audit trails in accounting can help your business prevent fraud, improve accuracy, and find missed transactions. To ensure your small business accounting records are as accurate as possible, consider keeping an audit trail.

Some costs can be difficult to predict. Some expenses you expect, others unexpected. But if you plan and prepare for the unexpected, your business will be much better off in the long run.

When it comes to your books, keep a thorough record of all your expenses, such as supplies, inventory, insurance, and utilities. And, come up with a game plan on how to handle unexpected expenses. That way, you can better anticipate big expenses and avoid being caught off guard in the future.

As a small business owner, there are a million and one things you need to do. It can be tempting to put your books aside to focus on running your business. But if you want to keep your business on track for success and keep your financial ducks in a row, make your books a priority.

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Keep your books up to date and organized from day one. If you stay away from your books, you’ll be buried in small business bookkeeping. Take the time to review and update your books so you can avoid a backlog of accounting tasks.

Add transactions to your books on a regular basis (eg once a week). The more often you do bookkeeping, the less work it becomes.

Your business needs an easy way to track income and expenses. Patriot’s accounting software lets you streamline the way you record transactions. Try it for free today! When you run a small business, you may deal with many day-to-day administrative tasks, such as accounting.

Whether you decide to hire a bookkeeper or a freelance accountant in the near future, knowing at least the basics of accounting is helpful. It helps you track and manage your business more effectively.

The Accounting Cycle For A Small Business

In this guide, we cover everything you need to know about accounting for your small business:

Small business accounting involves tracking all the money flowing into and out of your business accounts, capturing that data into financial statements that can then be analyzed and used to improve the business.

Keeping track of the above using different spreadsheets or physical folders can quickly become time-consuming and tedious.

Accounting software can be found in the form of a desktop application or as a cloud-based application.

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Although both types of software help you perform similar accounting activities, cloud-based accounting software offers the added benefit of being able to access your accounting data whenever you want, on any device you want.

We explain in more detail how you can use cloud accounting software to automate many accounting processes for your business. But before that, let’s go over some key accounting principles and terminology.

The accounting equation is one of the basic principles of accounting. It outlines the relationship between the 3 main components of your business: assets, liabilities and equity.

Double entry bookkeeping is the most widely used method of accounting. In double-entry bookkeeping, two entries are created for every business transaction that takes place: a debit and a credit entry.

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Here’s a table summarizing everything you need to know about debits and credits and the different account types:

A chart of accounts is a list of all the different accounts separated by type. Remember that an account in accounting does not represent a bank account.

The table below summarizes most of the accounts (and their types) you’ll need to use when doing bookkeeping for your small business. Highlighted in blue you can find the 8 most common accounts any small business should use for their accounting.

Then you need to compile all that data into something more useful that will help your business make strategic decisions. This is where accounting reports come into play.

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A balance sheet provides a financial snapshot of your business at a specific date. This is the basic financial report used by most small business owners.

While other financial statements report data for a period of time (month, quarter or year), the balance sheet reflects the company’s financial position at that particular point in time.

An income statement, also known as a profit and loss (P&L) statement, shows you how your business has performed over a period of time.

A cash flow statement has three sections for different types of activities: operating, financing, and investing.

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Operating activities is the part of the cash flow statement that deals with direct and indirect cash flows. Essentially, with direct cash flow reporting, cash is shown based on actual cash transactions.

And like the statement of cash flows, most small businesses don’t need to use the retained earnings statement. Large publicly traded companies generally rely on this financial statement to determine dividend payments, company valuation, etc.

The first thing you need to decide when doing bookkeeping for your small business is what kind of accounting system you are going to use. Choosing a clear and easy-to-use system can help streamline your entire business accounting process, saving you tons of time.

But ironically, many business owners think that using a checkbook is still an efficient way to manage their company’s accounting in 2021.

How To Manage Accounting For Small Businesses

For starters, it hinders your ability to grow your business. Once you start scaling it becomes more difficult to maintain and maintain an accurate record of all transactions.

And if that’s not enough, think of the trouble you’ll face when the IRS comes knocking on your door to collect taxes.


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