We work with countless small business owners and the number one thing they want to know is how to do the accounting for a small business.
It seems like a straightforward question. However, small business accounting is dependent on a number of factors. You might be starting from square one, or you’ve been in business for a few years and need to update accounting processes. Are you considering expansion? Relocating your business to another state? Moving from brick-and-mortar to online sales?
Every business decision you make will open up new questions about accounting, but you can still keep things running smoothly. Here are our top tips for small business owners.
How to Do the Accounting For Small Business
At the very basic level, small business accounting is simply keeping track of money coming in, and money going out. This is also known as bookkeeping—recording your financial transactions in a systematic way.
Whether it’s an analog or digital system, you want to make sure that you are keeping track of every purchase and sale, as well as any payments or debts.
Small business accounting also includes creating financial reports (like a P&L statement and balance sheet) and filing your taxes.
We advise every small business owner to set up a business banking account to manage your business finances. Any credit cards you use for your business should also be separate. This will help you more easily track your revenue and expenses as well as plan for taxes and additional purchases throughout the year.
Should I Use Accounting Software for Business
Some people really like to reconcile their receipts using an old-fashioned (paper and pen/pencil) ledger. If you’re more likely to do the accounting for your small business in this way, then it’s not a bad choice.
That said, learning to use accounting software can streamline your accounting process. Manual accounting takes longer and you’ll have to create every report by hand. With accounting software, many steps of the process are automated for you after you enter some initial information.
Using accounting software can also help you when you apply for a loan, file your taxes, or are considering a large business acquisition. Having a place where all your business information lives, updated regularly, will make each of these scenarios that much simpler.
When to Hire A Small Business Accountant
There’s no hard and fast rule about hiring an accountant to help you with small business accounting tasks.
The first thing to consider is the size of your business. If you’re a solopreneur or hobbyist just bringing in a bit of extra cash on the side, you probably don’t need to hire someone to take care of your finances.
The next thing to think about is whether you want someone to take on the majority of day-to-day accounting for your business, or whether you just need help for something specific. There are a few scenarios to consider, including the following:
- Am I finding it hard to keep up with routine accounting paperwork?
- Have I received an audit notice from the IRS?
- Do I need advice on how to structure my business?
- Are my payroll or sales tax issues complicated?
- Do I just want someone else to handle the reporting?
Finally, if you have not been using accounting software, it may be helpful to hire an accountant to help you set it up correctly. Doing this at the beginning can help you save time and money later on.
Ultimately, the choice to hire an accountant is up to you. If you’re on the fence, we’d love to hear about your small business needs and talk about how Granite Mountain Accounting can help.
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