Whether you’re an established business with decades of experience or planning to start one, you must be proud because it takes an indomitable will to achieve what you have now.
Business ownership comes with a lot of responsibilities. This includes keeping up with your finances, in which accounting plays a significant role. It seems tedious, but it’s imperative to see how much you’re making and spending for your success. Good accounting practices can also help you reduce your taxes and help you keep an organized system in the long run.
The Types of Accounting Reports
You can’t manage what you can’t measure, so before making any new investment or strategic decision, it is essential to know whether it will create value for your company. This checklist will help you decide on making good decisions while staying on top of your accounting tasks.
Maintaining organized records for your business’s financial statements is a much-needed aspect of running a successful business. It requires accurate bookkeeping for financial transactions like sales and expenses. Bookkeepers work with three types of accounting reports, namely balance sheets, income statements, and cash flow.
These statements allow investors and creditors to see at a glance the assets and liabilities of a business. You can use it to determine whether your company is profitable and whether you owe more than you own. Balance sheets are prepared at the end of every quarter.
A company’s income statement summarizes its revenues and expenses over a specific, typically three-month or one-year period. Quarterly and annual income statements are an essential part of financial planning. They allow business owners to compare the performance of their business over time. Income statements usually focus on revenue, gains, losses, and expenses that bookkeepers use to calculate your business’ net income.
Bookkeepers prepare cash flow statements to assist in analyzing changes in a company’s cash balance. They are made by subtracting non-cash expenses from net income.
Bookkeeping services can help you meet your goals by keeping track of your income and expenses. They produce financial statements you can use to understand how well your business is doing. They also work with you to use financial data to forecast business performance and plan for the future.
Accounting Tips for Small Businesses
Open an Account
There are two good reasons for setting up a separate business bank account: separate personal and business assets and fewer headaches at tax season. A business bank account is essential for keeping records in order. It reduces the risk of losing personal assets, increases the likelihood of getting funding, and allows your finances to be more visible to lenders.
Record Every Transaction
At the start of your business, set up a system to keep track of important records. Make sure to record each transaction in a proper account on a daily or weekly basis. Some examples are buying inventory from suppliers, selling goods to a customer for crash or credit, and paying wages to your employees.
File Your Receipts
Make sure to keep copies of all your sent invoices, cash receipts like checks, cash, and credit card deposits, along with cash payments. You should keep these five types of receipts: meals and entertainment, out-of-town business travel, corporate vehicle-related expenses, receipts for gifts, and home office receipts.
Set Up a Payroll System
Set up a payroll schedule if you’re considering hiring employees. If you’re selling products and it gets too much to handle, it’s guaranteed that you’ll have to hire someone at some point.
Make sure that you’re withholding the correct taxes and setting up a payroll system. Business owners may be required to file 1099s for independent contractors and file their information. Include a record of how much you’re paying each of them.
Determine Your Payment Terms
Think of the best way for you to accept payments when sales start rolling in. You can set up a merchant account at your bank, which will allow you to accept credit card payments directly from customers. You can also use third-party payment processors like PayPal, Stripe, or Square to process customer credit card payments online. Each one charges fees for its services.
Know Your Tax Procedures
If you offer your products and services online, customers may be located in different locations, and sales tax may get a bit tricky when you sell to international customers. Do your research to avoid confusion with the procedure.
Define whether your business operates in a destination-based or origin-based state. With the former, sales tax is to be applied based on the purchaser’s location. The latter will charge tax based on the state that you run your business in.
Accounting for small businesses can be time-consuming. But there are ways for you to make it easy to keep track of the financial performance of your business with the right system, personnel, services, and knowledge of what to do.