4 Proven Tips For Accounting For Small Business

Is accounting a massive blind spot for your small business?  Learn the importance of accounting for small business in this short article.

If I say accounting, how do you initially react?  Chances are that if you’re not a bookkeeper or accountant you wouldn’t be pumped with positive emotion!  And similarly for many business owners, accounting for small business remains very much a blind spot for them.  However, the topic deserves your attention and is worthwhile spending some time on understanding it.

Let me start by defining accounting.  It’s simply the process to record and report financial transactions for two key purposes.

Firstly, you need to record your financial transactions so you can accurately report your income and expenses to your tax authority.  It needs to determine how much profit you made so it can calculate how much tax you owe.

Secondly, and frequently overlooked by small business owners, is its strategic purpose.  Reliable and accurate financial reports will provide insight and help drive strategic action plans for your business’ future.

Regardless of whether you’re using it for either purpose, you need to ensure that your accounting is reliable, accurate and up-to-date.  The following outlines four practical proven tips to help you stay on top of your accounting.

#1 Choose Reliable Accounting Software

Choose reliable accounting software, such as Xero, MYOB or Quickbooks.  Commit to using it regularly to stay on top of your accounting.  It doesn’t really matter which brand you use.  We’re highly experienced using all three but we’d suggest asking your accountant which one they’d recommend you use.  If you’re both using the same version, your accountant won’t need as much time to process your work.

#2 Crunch the Numbers

You must record all transactions.  Any kind of income or expense must be recorded in your accounting software.  Many small business owners admit that this the most unappealing and most tedious chore they have to do.

Accounting sucks the life out of them – especially if they need to work unsociable hours to do so.  Many choose to delegate our outsource the task to a virtual accounting service provider or virtual bookkeeper.  They will not only take care of the task but will often do so at a fraction of the time and cost you’d do it.

#3 Prepare Financial Reports

Accounting for small business

It’s always a good idea to generate financial reports.  Your software or virtual accounting service provider will be able to assist you.

Two reports, in particular, will help you monitor your business and help steer you in the right direction.  Your profit and loss statement will summaries how much you’ve made.  Your balance sheet will illustrate your business’ financial position in terms of what you own (assets) and what you owe (liabilities).

I encourage you to generate these reports regularly.  If you’re a relatively small business, you could limit them to quarterly.  However, if you have a bigger businesses, I’d recommend you prepare monthly reports to give you the information you need to assess your business much sooner.

#4 Prepare Tax Returns

Finally, you’ll need your financial information for your payroll, GST, VAT or sales tax returns.  Your accountant will need it to prepare your annual income tax returns.  When you’ll need to prepare and file your returns will depend on your jurisdiction and business size.  If in doubt, consult your accountant.

Conclusion

You may find number crunching to be highly tedious and unattractive.  But, as most successful business owners would testify, it’s an essential and powerful process to help you succeed.  With the right focus and support, accounting for small business doesn’t have to be a source of frustration for your business