17 May 10 Small Business Accounting Basics To Keep The Business On Track
Whenever people tackle numbers, it can either get really dirty or complicated. Basically, your business needs accounting so you can keep track of your cash flow. Bookkeeping refers to the record-keeping aspect of accounting or varied financial activities happening in an organization.
Rummaging through your list of to-dos for your business, you will find out that financial accounting comes as a priority over other tasks. Check out these 10 small business accounting basics to help you keep the business on track:
- Open a separate business savings account. You would need to open a bank account solely for business, which is required for LLCs, corporations, and partnerships. If you are managing your business alone or under a sole proprietorship, it may not be necessary to open a separate bank account but is recommended. Opening a business checking account is a pre-requisite for paying supplier or partners. The savings accounts can be used to deposit your revenue or income. Opening separate business bank accounts make it quick and easy to allocate and organize payments for taxes, salaries, and others financial obligations.
- Compile journals and other source documents. This is where your bookkeeping starts. You have to get organized and compile all transactions, reports, financial statements, and other documents so you have them all at arm’s reach for bookkeeping purposes.
- Keep track of your finances. It is recommended to develop a system to get organized and compile receipts to keep track of your expenses. Record your expenses and categorize each one. It is best to keep overhead costs to a minimum especially if you are just starting out.
- Establish a payroll system. Having a payroll system in place for your employees and independent contractors will help you pay the right salaries and also withhold exact amounts of taxes.
- Set up a bookkeeping system. It is best to hire or outsource a bookkeeper. Using a simple Excel worksheet or Quickbooks can help you glide through the process effectively.
- Set up a payment system. How would you want to get paid? Establish a payment system that will provide convenience and efficiency for you and your clients. You can use Shopify Payments or PayPal for this.
- Know your tax liabilities. Your tax obligations would usually depend on the nature of your business. Are you employed or self-employed? There are different tax requirements for each one, so make sure you are compliant.
- Know sales tax regulations. Your accountant can guide you in complying with sales tax regulations when dealing with both local and international customers.
- Improve your business’ gross margin. Calculate the production costs or how much the product sells for and what you take home or profit at the end of the day. Keep the overhead costs low.
- Re-examine your strategy. It is much better to focus your time and energy on growing the business rather than evaluating the books. Hire a bookkeeper to do that so you can have more time in your hands for product development, sales, and marketing.
Business accounting isn’t rocket science but you would need an expert to handle it for you especially if you are the startup phase of your business. The above steps will guide you and help you keep track of what to do so you can get your business rolling and moving in the right direction.