How to Manage Your Small Business Accounting Tasks
Every small business owner knows it—the early stages are tough. And compared to larger, more established organizations, managing your finances is a very different ordeal altogether.
Challenges aside, though, the sooner you learn to track and manage your business’s finances efficiently, the better. And despite how intimidating it may initially seem, you can learn the proper small business accounting techniques to keep your pride and joy afloat.
The Basics of Accounting for Small Business Owners
So, how different is accounting for small business owners?
Compared to larger organizations, small companies rarely have a full-on accounting staff that can handle sizeable or complex issues. This often leaves the role of accountant to the business owner, who tackles everything from a do-it-yourself approach. While this tactic may work just fine for other business decisions, without a formal background in accounting or bookkeeping, it can quickly become overwhelming and risky.
If you’ve recognized that your small business’s accounting procedures need a bit more TLC than you’ve provided lately, consider the following eight accounting tasks you should prioritize for successful small business accounting.
1. Open a Business Banking Account
Regardless of size or industry, you should always start your operations by opening a business bank account. Keeping this separate from your regular funds can help protect your personal assets in case of audits, lawsuits, bankruptcy, or any other mishaps.
Start by opening a checking account, quickly followed by a savings fund to help you plan for taxes and organize cash flow funds. Invest in a business credit card to help fund significant expenses and start building credit.
2. Get Familiar With the Accounting Basics
While you don’t have to be an expert, you should at least know some accounting basics. Question which method sounds best and how your business fits into the equation. Do you prefer the cash method, which requires you only to recognize revenue and expenses when the payment occurs? Or should you use the highly-recommended accrual method, which counts payments and expenses as they’re earned?
Regardless of your chosen method, getting the accounting equation down pat is a great idea. This simple formula can make understanding your debit and credit so much easier:
Asset = Liabilities + Owners’ Equity
3. Keep Up With Your Transactions
No matter how inconsequential some expenses may seem, you need to keep up with them as much as possible. Per the IRS, businesses must keep documentation proving income, credits, and deductions on their tax return. Many small business expenses are tax deductible, but they cannot be claimed without a payment record.
Unfortunately, many people go the traditional route and resort to tactics like manually tracking receipts. For one person or a very small team, this can be overwhelming. Thankfully, though, small business owners can enjoy an efficient recordkeeping system with modern technology.
Expenses may vary depending on your business’s size, location, and industry. Generally, we advise you to keep up with items such as the following:
- Canceled Checks
- Previous Tax Returns
- Financial Statements
- W2 and 1099 Forms
4. Establish a Comprehensive Bookkeeping System
Every business owner needs bookkeeping. But unfortunately, many people struggle to understand how it differs from accounting. As a more low-level approach, bookkeeping describes the day-to-day process of recording business transactions, categorizing them, and reconciling your bank statements. Because this ongoing task should be completed so often, the best option for getting your books done is either using quality accounting software or seeking the help of professionals.
Need the hard numbers without the extra analysis? Frankly Bookkeeping is the perfect option for you. If you’re not yet ready to commit to full-on outsourced accounting services, our sister division can help keep your books-up-to date while reducing your overall expenses.
5. Create a Payroll System
Once you start hiring employees and independent contractors, it’s time to create a payroll system. Payroll is almost as much of a human resources responsibility as accounting, and as a small business owner, you have to play both roles. Use one of the many available payroll systems online to set up a schedule to ensure you’re withholding the correct amount of taxes. And for your independent contractors, make sure you’re accurately tracking how much you’re paying.
6. Find a Solid Accounting Software
Speaking of software, investing in professional business accounting software is one of the best financial decisions you’ll make at this stage in your development. Ditch the old-school methods of using spreadsheets and manual ledgers for everything, and increase your odds for accurate data as you save time.
7. Start Managing Your Income and Expenses
Take your newfound accounting knowledge and create a plan for properly handling your income and expenses. Learn how to write an invoice so customers can easily service you and pay your vendors on time for good credit.
And most importantly, learn how to create a budget plan that works. Taking any project without budgeting and considering the risks can severely cost you. And if you’re heavily monitoring your transactions, failing to budget properly is largely counterintuitive to your success. Start formulating a budget plan that’ll help maximize your return on investment and keep you from making risky decisions that’ll cost more than you intended to spend.
8. Invest in High-Quality Partners for Your Business Accounting Management
The best step you can take toward getting a handle on your small business accounting tasks is to partner with an experienced accounting partner to help you measure and understand your finances. You could consider hiring a:
- Certified Public Accountant (CPA)
- Tax Preparer
- Financial Controller
Or, even better—an entire team of outsourced financial accountants.
Devine Consulting Is Always Focused on Growing Your Business
With our complete financial accounting services, you can participate in a trusted, secure process that guarantees peace of mind. Regardless of your company’s size, we’re creating real solutions and making our clients’ lives easier. So what are you waiting for? Join The Flock and see what sets us apart.
Let’s build a relationship. Request a consultation today.