Small Business Accounting Tips

So you have started a small business, congratulations! Your business has the essential components: a product or service, a marketing plan and a way to record your business transactions. Many new business owners have one or two of the three things listed above figured out but not all three. You may be wondering which is the most important which you will receive the reply from any successful business owner, "All of them!" In this article, we are going to focus on the importance of bookkeeping and small business finances.

Bookkeeping in small business is not usually complex, but for some reason, the thought of recording transactions and reviewing financial statements strikes fear in new business owners. The truth of the matter is that as a business owner, you should be focused on selling the product or service you are offering, networking and making the contacts every successful business does. Accounting is a detail-oriented and sometimes time consuming process to ensure all company transactions are being recorded properly. For this, hiring a bookkeeper or accountant is usually advised for small businesses that can afford the usual hundred dollars a month most small business accountants will charge for basic services.

If you are considering completing many or all of the accounting functions yourself, then there are solutions available in the computer software variety to help you. Quickbooks provided by Intuit Software is an extremely popular software choice for small businesses. If the $200.00 investment is too much, the company offers a slimmed down free version similar to the Microsoft Office Accounting Express software. Both packages will enable the business to connect to their tax accountant by transmitting financial data over the internet, complete typical bookkeeping transactions, allow for payroll to be completed which requires a separate service for a nominal charge, and both will allow financial reports to be prepared which at the very least consists of a balance sheet and an income statement. If using either accounting package for small businesses, the scalability of the software is excellent allowing the company to grow quite a bit before the accounting software package would need to be upgraded.

Completing a few courses in accounting would not be a bad idea. Courses are offered online through many colleges and can be completed at your leisure. Core accounting concepts learned in these courses will provide a better understanding in analyzing financial statements and the flow of full cycle accounting. Ultimately, as a business owner, your primary concern is going to be the information given on the income statement or profit and loss report. How much money is your business making? What service areas or products are selling more, and how much variable and fixed costs are affecting the bottom line? These are the questions that will be answered by reviewing the financial statements.

Making sure that proper accounting and bookkeeping practices are completed is very important for any business owner. The information provided by the record keeping allows a business owner to know how the business is doing at any given moment. Also, most lending institutions are going to require financial statements to review to assist them in making the decision of whether the business is going to be able to pay back a loan.

Hiring an accountant is also recommended even if you choose to complete most of the accounting functions yourself. Accountants are specially trained professionals who deal with the data that runs the company. They are able to provide valuable insight into how to streamline your business, and how to specifically record typical entries to make sure that the information conforms to the generally accepted accounting procedures. The question that you might be asking is, "CPA or non-CPA?" The truth about certified public accountants is that the only difference between many CPA's and a normal non-CPA accountant is that CPA's are able to certify financial documents for public companies. Most companies do not require certified financial documents for the IRS, especially small businesses which are not publicly traded.

The main reason why many business owners choose to hire a CPA in place of a bookkeeping professional or accountant is because there is a misconception that the CPA is guaranteed to know more about accounting. It is true that the CPA certification has become more strict requiring an accountant to have the equivalent of a masters degree before certification is awarded. If your CPA is younger, then chances are, they will be more educated in current accounting and business concepts. On the other hand, if your CPA is much older, chances are that the education may only be a four-year degree which may not even be in accounting. I know a couple CPA's personally that have marketing degrees. The plus side is that older accountants will have more industry experience, but you will pay for that experience.

However the decision goes for handling the accounting needs for your company, make sure that the records are done accurately. The worst thing for a small business owner is to believe that his or her business is doing well only to find out that the bookkeeping records are incomplete showing hidden debt or inflated sales figures.