Small business owners don’t always have the money to pay an accountant.
When you’re the person in charge of the day to day operation of your small company, it can be overwhelming to cover all the bases. You’ve got to make big decisions, manage whatever staff you have, and look after the finances.
Obviously, keeping track of your earnings and expenses is important, so how do entrepreneurs juggle all of their other responsibilities and their accounting?
Today we’re going to show you how to do accounting for small businesses. Getting a grasp on accounting basics will allow you to keep your business moving forward until you can afford to pay an accountant.
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How to Do Accounting For Small Businesses
It’s important for you, the boss, to have an understanding of your company’s inner financial workings if you’re going without an accountant. Understanding this stuff lets you know how healthy your business is and what your financial trajectory is going to be.
For instance, are you in a position to expand in the next few years or are you going to be looking for a small business loan from BonsaiFinance? If you’ve got accounting knowledge, you can make informed decisions for the future. Let’s take a look at some common accounting practices for small business owners.
Open a Bank Account
When you start a business, you should always open a separate bank account to keep the company’s finances and your finances apart. Instead of just going to your bank, shop around for different business account perks and figure out what’s best for you.
This is crucial come tax season and any LLC or partnership is required to have a business bank account and credit card to avoid any confusion about funds. Open both a checking and a savings account so you have the option of separating funds for tax purposes.
Have a System
One of the most common systems for keeping track of funds is the cash accounting system. You just record anytime you receive funds and anytime you make payments. It’s a simple system that allows you to keep track of exactly how much money you’ve got.
As your business grows, you can use the accrual method. With this, you count sales and expenses as they come up, regardless of whether they’ve been paid or not. This is better for larger companies that deal with larger sums of money.
Use Software
Use accounting software like QuickBooks to make it easy to look at your accounts and make financial decisions. If you use cloud-based software, you can hire employees down the line to handle accounting for you and they’ll be able to easily access your info.
Keep Track of Deductibles
Always use your business account and credit card to make business-related purchases, then keep track of your receipts. You can take pictures of receipts directly on the QuickBooks app or do it the old fashioned way and stow them away until you do your taxes.
Understanding what is and isn’t tax-deductible will make it easy to do your taxes. Things like office equipment, business-related travel expenses, and internet/phone service are all deductible. There are a lot more deductibles though, so do a bit of research and find out what you can write off.
Grow With Your Business
As your business grows, your accounting system will get a lot more complicated, so it’s important to learn how to do accounting for small businesses in preparation for doing accounting for a slightly larger business. Eventually, you’ll be able to hire an accountant to free up your time so you can focus on other managerial tasks.
If you found this article helpful, check out our website for more informative posts on life as an entrepreneur.
About Carson Derrow
