Accounting Tips for Small Businesses to Keep the Books Balanced

You have a lot to manage as a small business owner. The first thing you must do is see to it that everything in your company functions well and the books remain balanced. Even though it could initially appear difficult, staying on top of your finances is simple with the correct accounting advice. Here are some pointers to get you going.

Maintaining the books in balance shouldn't add to the difficulty of starting and sustaining a small business. Here are some pointers to help accounting seem a little less intimidating. Make a system that works for you and follow it first. Then, make sure all of your revenue and expenses are accounted for, whether you use a paper notepad or software like QuickBooks.

Second, schedule a few hours every week or month to assess your financial situation. This will ensure that everything is in order and that there are no unpleasant surprises at tax time. And lastly, don't be embarrassed to seek assistance. Contact your accountant or another financial expert if you need assistance or clarity on anything relating to your books.

Are you a small business owner who finds it difficult to manage your finances? Do you ever feel like your accounting requires you to play catch-up? If so, you are not by yourself. But don't worry, there are a few easy tricks you may use to organise your books and manage your money. So why are you still waiting? For some useful tips, keep reading!

Do you ever feel like your accounting requires you to play catch-up? If so, you are not by yourself. It can be challenging for many small businesses to maintain organisation and bookkeeping.

However, you may make bookkeeping simple by adhering to a few straightforward guidelines. Some of our greatest advice for small business owners looking to organise their money will be shared in this blog post. To find out more, keep reading!

To manage your money as a small business, it's critical to have your books in order. Here are a few accounting hints to assist you in achieving this objective.

Make sure you are aware of the components of your bottom line first. To get a thorough picture of your company's financial situation, keep track of all your costs and revenue. Create a budget and stick to it, second. This will assist you in staying within your means and ensuring that your company continues to grow.

Use the right software to assist with bookkeeping tasks, and finally. You'll save time and assure accuracy when capturing financial data by doing this. You can maintain control over your finances and ensure the smooth operation of your business by putting these suggestions into practise.

Small business owners understand the significance of keeping their books organised. However, keeping up with everything can occasionally be challenging. Therefore, we have put together some advice to assist you in maintaining your bookkeeping. By following these simple tips, you'll be able to ensure that your finances are always in good shape. So read on if you're prepared to set your firm on the right course.

Are you a small business owner having trouble maintaining the balance of your books? You're not alone, so don't be alarmed. Many small firms struggle to manage their money, particularly if they lack accounting experience.

But don't give up! A few straightforward guidelines might help to simplify bookkeeping. This blog post will outline some of the most important things to remember when keeping track of your expenses and revenue. So continue reading for useful tips on maintaining financial organisation.

Keeping your business books balanced is essential for making sound financial decisions. But for small businesses, it can be not easy to know where to start. These accounting tips will help you get started. First, categorise your expenses correctly and track your revenues accurately.

You should also establish a system for recording payments and tracking inventory levels. Having an accurate understanding of your finances will help you make informed decisions about the future of your business. With careful bookkeeping, you can keep your business finances on track and stay in control of your company's financial destiny.

Let's get started!

What is accounting for businesses?

You could be thinking, "What is business accounting?" whether you're the happy owner of a brand-new firm or you're starting your 10th year of climbing the corporate ladder. The following is a straightforward definition of business accounting:

Gathering and analysing financial data regarding business activity, documenting transactions, and creating financial statements are all parts of business accounting.

There are several reasons why business accounting is significant. You may attract investors, prevent theft of your assets, uncover opportunities to expand your business, and advance it by keeping track of your assets, obligations, inventory, and other documents. Bookkeeping, preparing and filing tax returns, and creating financial reports are among the main responsibilities of small business accounting.

You may be able to manage your money more successfully with the use of business accounting, which will allow you to make better informed financial decisions regarding your company. Many owners of small businesses choose to do their own accounting in the early stages of their companies in order to cut costs. If you find yourself in the same predicament, it is imperative that you have a solid understanding of the foundations of corporate accounting.

Basics of business accounting

It would be beneficial if you understood a few business accounting essentials to maintain effective business operations. Even if you are an expert in sales or marketing, you should never undervalue the importance of basic accounting.

Moving your organisation ahead can be very difficult without a clear financial picture. Important accounting concepts and words are listed below to get you started. View our articles on accounting terminologies and accounting principles for a more thorough understanding.

• The money you owe to creditors and vendors is referred to as accounts payable and is recorded as a liability because you are required by law to make the payment.
• Due to the customers' legal obligation to pay, accounts receivable, which is money that customers owe for any purchases of goods or services they made, is frequently represented as a creditable asset.
• Businesses that use the accrual basis of accounting recognise revenues and expenses at the time of a sale.
• Assets include everything that your business possesses that is valuable, including cash on hand, receivables, inventory, furniture, machinery, and real estate.
• The balance sheet is a financial record that provides a snapshot of the financial situation of your business at the conclusion of a given time period. Assets, liabilities, and shareholder equity are all included.
• With the cash basis of accounting, a business records a sale as soon as money is received.
• Accounting professionals that use double-entry bookkeeping create two entries for each transaction. A pair of comparable sides must have an equal number of debits and credits on each side.
• Liabilities can be thought of as financial commitments that a firm must fulfil, and some examples of liabilities are accounts payable, income taxes, wages, loans, and other accounts outstanding.
• An income statement, which is also commonly referred to as a profit and loss statement, is a document that details the revenues, costs, and nett profits for a specific period of time.

How to handle accounting for a small business

Accounting is an essential component of running a business of any size, from a one-person operation to a multinational conglomerate, thus it doesn't matter what kind of company you run. Once you have a firm grasp on the foundations of business accounting, you can go on to the next step, which is keeping track of the financial data pertaining to your organisation.

Small business accounting is keeping track of all of your company's earnings and outlays and using that data to produce invoices, complete payroll, and submit tax returns.

Even if accounting is not your primary source of motivation, you still need to be able to do it because it is a requirement of the job. You need to complete accounting activities on a daily, weekly, monthly, quarterly, and annual basis in order to guarantee the profitability of your business.

A Certified Public Accountant (CPA) is a professional who helps businesses of all sizes create financial records, manage cash flow, file tax filings, and assess their financial health.

Because the software for business accounting is so uncomplicated and easy to use, you should have no trouble completing these responsibilities. Managing your company is made easier by using our company accounting software, which helps with everything from processing taxes to generating financial reports. Have a look at the roles and responsibilities outlined below for your company's accounting department.

Daily accounting duties for businesses

When it comes to the demands of your daily accounting business, you don't have much on your plate. Every week, month, quarter, and so forth, you have a tonne of financial statements to evaluate, yet your regular business accounting duties only include one major task.

1. Verify the cash balance

Because financial stability is essential to the success of your business, you should avoid getting your cash balance anywhere near or below zero. Consequently, the moment you get out of bed, you should start counting your money. Being aware of how much money you plan on receiving and how much money you plan on paying over the next few days, weeks, and months.

Daily accounting assignments

The weekly accounting tasks require additional effort. They consist of billing, managing financial information, and other entertaining business bank account activities. Here is where having a superior accounting system is advantageous.

2. Keep a transactional log

You should either record each transaction (invoicing customers, receiving payment in cash from clients, paying vendors, etc.) daily or weekly, depending on demand. Although utilising a digital spreadsheet or manually entering transactions is permitted, using a small business accounting application like QuickBooks is undoubtedly simpler. The benefits and control far outweigh the costs.

3. Record and store receipts

Keep copies of all paid invoices, as well as receipts for cash, checks, and credit card deposits (cash, check, credit card statements, etc.).

Create an alphabetical vendor file so that information may be accessed quickly. For instance, you should create a file for your payroll that is organised according to the date of each paycheck, as well as a file for your bank statements that is organised according to the month.

During tax season, many people have the common practise of throwing all of their paper receipts into a box and then attempting to make sense of them. Unless you have a very small number of transactions, it is best to organise your receipts into separate files as they are received. This is true even if you only have a few to keep track of. In addition, the majority of accounting software programmes give users the ability to scan paper receipts, which enables them to fully eliminate the need for physical files.

4. Examine delinquent invoices from suppliers

Every company needs to keep a folder for delinquent vendors. Each of your vendors' billing information, payment due dates, and amounts owed should be kept on file. You might desire to benefit if sellers provide discounts for paying in advance.

5. Pay suppliers and authorise checks

To avoid late fees and displeased employees, keep track of your accounts payable and set aside money to pay your suppliers on schedule. It would be preferable if you could extend payment deadlines to nett 60 or 90. Keep copies of invoices made and received using accounting software, whether you pay online or by cheque in the mail, to make things simpler at tax time.

6. Construct and deliver invoices

Always remember to include the terms of payment. The word "Net 30" located at the bottom of your invoice indicates that the majority of invoices are due within a period of 30 days from the day they were issued. If there is no due date, you will have a harder time estimating the amount of monthly revenue you will receive. There is additional information on how to expedite payment in our post that discusses the importance of timely bill payment.

7. Examine the anticipated cash flow

Managing your company's cash flow is extremely important, particularly in the initial year of operation. By making an estimate of how much cash you will require over the course of the following few weeks and months, you can potentially set away enough money to pay your bills, your staff, and your suppliers. In addition to this, you are in a better position to plan out how you will spend your money.

It would be to your advantage to have a clear statement detailing your current financial status, anticipated future cash receipts, and anticipated cash payments for this time frame. Having such a statement would be advantageous. This is a statement of the cash flow, if you will.

Monthly accounting tasks

You must manage a variety of monthly accounting responsibilities whether you own an established or fledgeling business, brick-and-mortar store, or internet store.

8. Check your business's bank account

Similar to the process you go through when you reconcile your bank account, you need to make sure that the cash business transaction entries you enter are accurate and use the correct cash position. When you reconcile your finances, it is much easier to spot and correct any errors or omissions, regardless of whether they were made by you or the bank, and to do so in time to repair them.

9. Examine past-due receipts

Include a column labelled "age" to classify "open bills" according to the number of days they are overdue for payment. You will receive a concise summary of unpaid invoices from customers as a result of this. At the beginning of each month, it is a good idea to contact customers, clients, and anybody else who owes you money by writing them overdue reminder statements and sending them.

You are going to return to this account at the end of your fiscal year in order to make a determination regarding the receivables that you ought to either write off in order to qualify for a deduction or forwards to collections.

10. Analyse inventory status

Set aside time to replenish products that sell quickly and identify others that may need to be marked down or written off if you are managing inventory. It's simpler to make changes if you periodically check (and compare to previous months' data), so you won't be under or overextended.

11. Payroll processing or review, and approval of tax payments

Even though you have a set schedule for paying your employees (typically semimonthly), be sure to remember that payroll tax requirements based on federal, state, and local laws must be met at various times. This is because payroll tax requirements based on federal, state, and local laws must be withheld, reported, and deposited to the appropriate agencies on the required dates.

Before payments are received, evaluate the payroll summary to avoid having to make changes during the subsequent pay month. An affordable payroll service company can handle all of this for you, saving you time and ensuring accuracy. Use our free paycheck calculator to figure out how much needs to be taken out of each paycheck.

12. Compare actual profit and loss to the budget and the previous period.

When you look at your profit and loss statement (also known as a P&L or an income statement), which includes information for the current month as well as the entire year, you can determine how much money you made as well as how much money you spent. Consider it in light of the quarterly or monthly budget you keep. The comparison of your actual and predicted numbers might help you identify areas in which you may be spending excessively or insufficiently.

When you compare your current year-to-date profit and loss statement with the same income statement from the prior year-to-date, you can search for variances and make adjustments even if you haven't prepared a budget.

13. Comparing the month's end balance sheet to earlier periods

When you compare your balance sheet from one point in time, say the 30th of June 2019, to a balance sheet from a prior point in time, like the 31st of December 2018, you can get an idea of how well you are managing your assets and obligations at the moment.

It is essential to discover what is written up and down and to know the reasoning behind it. For example, if you have a bigger accounts receivable balance, ask yourself whether this is because recent sales have been higher or because customers are paying off their balances more slowly.

Quarterly accounting tasks

Only tax season and the significance of meticulous bookkeeping may be said to be certain in this world, as Benjamin Franklin almost stated. (Don't examine the accuracy of that quote; just take my word for it.)

The quarterly accounting duties take care of the larger-scale aspects of managing a small business or working for yourself, such as tax projections, quarterly payments, and a constant reminder that you require an excellent accounting system.

14. Prepare an updated yearly P&L forecast

It is necessary to evaluate your level of income, the growth or decline of your nett assets, the gap between your revenues and expenses, the causes behind such changes, and the practises you employ in order to make a profit. While doing so, you will become aware of issue areas and be able to make adjustments that will result in increased sales and margins.

15. Examine the quarterly payroll reports, then make payments

Your payroll records for the past two months have been looked at. However, the vast majority of states require quarterly payroll reports in addition to any additional payments due on a quarterly basis. To reiterate, it is in your best interest to have the company that handles your payroll complete and file these reports. It is up to you to investigate the processes and data associated with payroll and determine whether or not they make sense.

16. Examine the sales tax and submit quarterly payments

If your business is located in a state where sales tax is required, make sure you comply to avoid harsh penalties. Your state tax requirements can be ascertained with our assistance. Additionally, you can estimate sales tax using our free tool.

17. Calculate your expected tax and pay it

As in most states, income taxes are gathered. If you have any unpaid estimated taxes for that quarter, check your year-to-date P&L. If necessary, your tax accountant can help.

Must-Know Bookkeeping Tips for Businesses

1. Separate your personal and professional accounts

Mixing your personal and corporate finances initially might not seem like a big deal. But every company needs to have its own bank account, apart from any personal accounts. Depending on the nature of your organisation, a separate business bank account may often be required.

It will be simpler for you and your bookkeeper to sort through the purchases and sales that are pertinent to your business using this separate account, saving you time, effort, and frustrations.

2. Using cloud-based accounting software, automate

We're fortunate to be living in a time where cloud-based accounting software enables you, the business owner, to access your company data whenever you need it. Every month, heaps of documentation need to be sorted through, spreadsheets need to be checked, and manual calculations need to be done. Most of the labour-intensive job is now done for you by cloud-based software.

Accounting software may track your incoming and outgoing expenses, send bills to clients automatically on the appropriate due date, and produce reports on your cash flow. There are many different software options available.

The option that simplifies your life will be the appropriate one for you, and if you're unsure which one is best, you can always consult a bookkeeping specialist for clear guidance.

3. Establish a simple system for keeping records

Every transaction that your company conducts should be documented and organised so that you can easily update them and manage your cash flow.

You can foresee future prospects for your firm and ensure tax compliance in the event of an audit by keeping track of all business records, including invoices, receipts, and costs.

Even though there are simple solutions to digitise your paper receipts, if you prefer to maintain paper records, they should be organised into a straightforward system and kept in a secured and secure cabinet. Having a backup of your records is also recommended in case something is lost.

Alternative options include scanning receipts with your phone or sending electronic bills directly to your online bookkeeping system for reconciliation and record storage. Most cloud-based bookkeeping software can also save these documents in these ways.

4. Set Reminders for Crucial Due Dates

Each and every transaction that is carried out by your organisation ought to be recorded and arranged in such a way that it is straightforward for you to keep tabs on them and control your company's cash flow.

If you keep track of all of your business documents, including invoices, receipts, and costs, you will have a better ability to anticipate the future of your company's commercial prospects and maintain tax compliance in the event that you are audited.

Even if there are straightforward methods available for digitising your paper receipts, if you still wish to keep your records on paper, you should store them in a secure cabinet and organise them in accordance with a system that is easy to understand. Maintaining a backup copy of your documents is a prudent precaution to take in case any of your data should become corrupted or vanish.

Instead, the vast majority of cloud-based accounting programmes enable you to maintain these records by scanning receipts with your phone or emailing electronic bills directly to your online bookkeeping programme for the purposes of record-keeping and reconciliation.

5. Create an Audit Trail

No matter how meticulous you are with your accounts, a tax audit could still be in your future. It would be beneficial if you left a paper trail supporting everything you've bought and everything your customers have paid for.

An audit trail is essentially a group of documents that attest to the veracity of the transactions listed in your records. If you encounter any problems with tax mistakes, source papers, or missing transactions, your audit trail will enable you to retrace your steps.