When running a small business, you should have a basic understanding of accounting. Knowing the basics will make you feel confident in the future of your business, and you’ll have better knowledge to plan for your long-term financial success. As a small business owner, accounting helps you track and manage your money effectively, especially if you’ve just launched your business recently.
Organize your books
Start by establishing a regular practice of compiling bank statements, recording transactions such as purchases, sales, cash receipts, etc and how to categorize them. As a new business owner, you can manage your bookkeeping needs by using a simple spreadsheet that allows you to break down into categories that will represent the different streams of income that your business has. However, using a spreadsheet may become confusing, time-consuming, and prone to manual errors. Additionally, as your business keeps growing, using a spreadsheet is not anymore advisable. Hence, you may want to use invoicing or bookkeeping software such as Quickbooks. There is also an option to outsource or hire a bookkeeper or accountant. The need for you to organize your company’s finances is important to monitor the cash flow in your business, you will be able to make a specific income goal and it may lower your taxable income by tracking and deducting business expenses when you file taxes.
Choose Your Recording System
Once you have an organized bookkeeping system, you can choose how to record financial transactions by choosing what method of accounting you prefer: the cash basis or the accrual basis of accounting. Recording income and expenses at the time they are actually received and paid is the cash method while recording an income when you make a sale and recording expenses when you have one is an accrual method of accounting. Although the cash method is easier to use, it would be wise that you use the accrual method because it is commonly used and it allows you to have a realistic idea of income and expenses during a given period of time.
As soon as your business starts making money, open a separate bank account from your personal ones so that you can monitor your business’s finances separately.
At first, your small business may start out as a one-person show. When you reach a point that it’s time to hire an employee, you need to set up a payroll system and make sure you’re withholding the correct taxes. You can check out accounting software that includes payroll as a feature.
Hire an accountant
When you get overwhelmed in doing and managing your small business accounts, you may want to ask for guidance from financial professionals. One of the financial professionals that you can ask for help is an accountant.
Accountants can do many things in your small business and these include the following:
- Form your business and make a business plan
- Help open new bank accounts
- Audit cash flow and manage your inventory
- Manage debts and chase down payments
- Plan budgets and find cost-cutting opportunities
- Advised business strategy and recommend business tools
- Prepare year-end reporting
Get Your Accounting Questions Answered by Accountants in El Paso, TX
If you’re looking for a reputable CPA firm in El Paso, TX consider calling us at Marcus, Fairall, Bristol + Co., PLLC! We’ll answer any and all of your accounting related questions. We offer our clients with a variety of accounting services such as the following:
- Forensic Accounting
- Tax Problems and Resolution
- Tax Planning for Individuals
- Small Business Accounting
- Non-Profit Accounting
Marcus, Fairall, Bristol + Co., PLLC
230 Thunderbird Dr Ste G, El Paso, TX 79912
Phone: (915) 775-1040