While you may be an expert at marketing or operations, don’t underestimate the importance of small business accounting. Without a clear financial picture, it can be difficult to move your business forward. This can be as simple as a statement showing your current cash position, expected upcoming cash receipts, and expected cash payments for benefits as a percentage of wages this period.

Do You Need an Accountant for a Small Business?

People who aren’t small-business accountants or often use bookkeeping and accounting interchangeably, but they actually mean two different things. Accounting means not just keeping financial records but also analyzing and interpreting financial data so you can make wise fiscal decisions. If you’re a traditionalist and are more interested in tracking income and expenses than bank connectivity or cloud access, check out GnuCash.

Take stock of your inventory

With these basic accounting tips for small-business owners under your belt, we’re sure you have the tools you need for small-business success. Most accounting software automates entering information from the documents above. For instance, receipt scanners let you take photos of receipts that you upload to your software for easy journal-entry generation. And if you send invoices or pay bills with your software, the numbers should sync automatically with your ledger.

The bookkeeper enters relevant data such as date, price, quantity and sales tax (if applicable). When this is done in the accounting software, the invoice how to use a cash book in accounting is created, and a journal entry is made, debiting the cash or accounts receivable account while crediting the sales account. The most important financial documents for any business owner who wants to understand their finances are balance sheets, cash flow statements, and income statements. You can look at these documents yourself or collaborate with a financial professional to analyze the state of your business’s finances.

1. Without a clear financial picture, it can be difficult to move your business forward.
2. Yes, you’ll need to determine how you want to manage your books, such as the do-it-yourself route, such as Excel spreadsheets, or use accounting software like QuickBooks.
3. Remember, any time you record a journal entry, there always needs to be a debit and a credit entry.

When is it time to hire an accountant?

At the same time, accountants are increasingly expected to be proficient in using software to support small businesses with their accounting and financial needs. Once you’ve settled on an accounting method, it’s time to set up your books. Here are the main questions to ask that can guide you toward creating the best bookkeeping records for your small business. If you set up your finances with cash-basis accounting, you’ll record financial transactions when the cash moves accounts.

You can use an accounts receivable aging report for a quick view of outstanding customer payments. The beginning of the month is a good time to send overdue reminder statements to customers, clients, and anyone else who owes you money. You already know this, but just to make sure it’s crystal clear, taxes are ridiculously complicated. Small-business taxes vary between industries, states, and business types, so to get the best advice on what taxes your business needs to pay, consult with your accountant.

Reconcile your business bank account

If you follow the tips we’ve laid out above, you’ll likely be able to focus some of your time on other important facets of your business. Most reputable adjusting entries accounting software allows you to scan or snap a picture of receipts and other documents using your phone and attach it to the transaction. At the end of the accounting period, take the time to make adjustments to your entries. For example, you may have estimated certain invoices that are later solidified with an actual number. Once the entries are assigned to the correct accounts, you can post them to the general ledger to get a bird’s-eye view of your current cash status.

Since the information gathered in bookkeeping is used by accountants and business owners, it is the basis of all the financial statements generated. Most accounting software allows you to automatically run common financial statements such as an income and expense statement, balance sheet and cash flow statement. Business owners or accountants can then use these statements to gain insight into the business’s financial health.

Business accounting is integral to the operation of small and medium-sized businesses. Business owners can choose to manage their own finances, hire a bookkeeper, or outsource accounting duties. Using a comprehensive bookkeeping software program often becomes easier over time. The best bookkeeping software syncs with your business bank account and payroll systems so that you’re easily able to import and export transaction history. We’ll cover some of the best business bookkeeping software options a little later. At the end of every pay period, the bookkeeper will accumulate employee payroll details that include hours worked and rates.