Small Business Accounting for Your Business’s Needs

Whether you’re launching your small business or trying to streamline its financial transactions, small business accounting solutions can do wonders for your business. The right one can boost your business’s efficiency, optimize its balance sheet, and even make your life as a small business owner that much easier.

Improving your accounting system may not be the most glamorous way to invigorate and tidy up your small business’s affairs, but the effects will be staggering. Regardless of what kind of small business you’re running, you can benefit from integrating an accounting solution into your business plan from the start.

What is small business accounting? 

Because of a small business’s scale, small business accounting has to do all the functions of accounting firms. Small business accounting is about more than just keeping the numbers. It’s responsible for recording, tracking, and analyzing the financial statements and financial health of your small business.

Long before the pandemic, the way we were conducting businesses was changing. Hybrid work life, digital transactions, and an implementation of cloud-based systems have all rocked the way business is done. 

The right accounting system is responsible for so much more than keeping your financial information.

Under an accounting system’s purview, there are a variety of tasks and functions it performs: 

• Day-to-day financial performance analysis
• Profit and loss statements 
• Cash flow statements
• Payroll solutions
• Company credit card monitoring

All of these are key to keeping the lights on, managing cash flow, and knowing the ins and outs of your business. Accounting is not just tracking your business’s finances, but detecting trends and utilizing that information to make sound financial decisions for your small business going forward.

Bookkeeping for Small Businesses 

Bookkeeping, like accounting, can make or break your small business. Though the terms are often used interchangeably, bookkeeping is a prerequisite for capable accounting, not necessarily the same thing. 

Record keeping and accurate bookkeeping are integral to the efficient functioning of a small business. You can have the best small business accounting software on the market and it won’t help you if your financial information isn’t well maintained. 

That’s where bookkeeping factors into the equation. Bookkeeping keeps track of your business accounts, expenses, and tax information which will be useful come tax season. By recording the expenses and income of your small business, bookkeeping keeps track of your business’s financial transactions and history. 

There are two bookkeeping methods you can choose, based on which would fit your business best.

1. Accrual method: This tracks revenues and expenses when a transaction occurs, even if the funds haven’t been processed. To do this, your bookkeeping will need to track accounts receivable and accounts payable. 
   
   
2. Cash method: Revenues and expenses are recognized at the time they are actually received or paid, not before. 

Expenses are one of the biggest parts of your small business. As such, it’s the primary concern of any bookkeeper or bookkeeping software to monitor expenses. 

Some common bookkeeping functions include tracking expenses like: 

Management Expenses

Whether it’s your rent, utilities, or internet bill, doing business is an amalgamation of bills sent to your business and paid out of your business’s various budgets and accounts. From the money you spend on office supplies (stamps, staples, etc.) to the funds you have allocated for your space’s rent, these expenses are important to stay on top of. 

Invoices

Third-party vendors, whether you’re utilizing their services or you are a third-party vendor to another business, make invoice management a large component of expenses. Receiving, processing, and understanding how money is spent on these external sources will give you a better grasp of your small business’s spending. 

Loan Payment

Inventory, retail space, or equipment are all expenses you’ve accepted as part of your small business. Often, these bigger purchases come with the aid of loans and loan management is integral to make sure you’re not falling behind. Bookkeeping can help keep track of payment schedules and important deadlines to keep you out of hot water. 

Your Small Business’s Bank Accounts

Regardless of how small your small business operation is, you don’t want to conflate your small business funds and accounts with your personal ones. This can insulate you from financial damage down the road, whether that be bankruptcy, lawsuits, and even fiscal audits.

The bank you choose and its management of your loans, funds, and credit accounts will really improve the ease of use and accessibility for your small business’s accounting. Whether you’re looking to open a business account, start a company charge card, or access loan options, a bank account is your business’s first step to financial operation. 

You may value different things from a banking institution - lower interest rates on checking accounts, investment opportunities, or an accessible mobile app. Regardless of your business’s needs, a bank account for your small business is the easiest place to start when establishing its financial needs. 

Let’s take a look at some crucial functions a bank account will do for your small business. 

Business Accounts

By opening a checking and subsequent savings account, you can start organizing your income. Checking accounts will help you expedite your spending on important expenses, while a savings account (or multitude of them) will allow you to set aside funds for taxes, future expenses, and business savings for a rainy day. 

Though it is not legally required, having a separate bank account from your LLC is the quickest way to protect yourself from financial and legal complications down the road. 

Credit Cards 

Checking accounts and credit cards are excellent ways to build credit, not just as individuals, but for your small business as well. Credit cards can help you make large, but manageable, purchases with anticipated income all while improving your business’s credit. 

Depending on your business’s expected expenses, you may be interested in taking out a credit card that earns you miles for travel, gives you perks for spending, or you may value low interest cards. Whatever need your business has, a credit card will help you achieve its goals.

Payroll Needs

As a small business owner, especially before you’ve even launched this huge endeavor, you may not think you have difficult payroll needs. However, payroll management and expenses will take up a large chunk of your time and your profits if you don’t manage them correctly.
 
From benefits to employee perks, an accounting management system will help you keep an eye on your expenses, your employee’s time, and how well all these pivotal factors are being managed. The more efficient a system you get from the onset, the easier it will be as you scale up your company for additional users and more employees. 

The more employees you have, the more susceptible your accounting is to errors. Whether that affects your employees’ end of the year holdings, tax benefits, or even how many hours they can work, a payroll management system in the form of accounting software can keep you from committing those errors. 

Accounting Software

Accounting software, payroll management software, all of these things offer similar services. Whether you utilize an online solution like QuickBooks online or another payroll management software, these accounting solutions can alleviate strain on your time and your small business by alleviating manual data entry tasks and potentially hazardous tax errors. 

Taxes for Small Businesses

Speaking of taxes, programs like QuickBooks for small businesses and other payroll management systems can make things easy for your small business come tax season. These programs make it their priority to stay current with the latest tax regulations so that you don’t have to. 

Sales Taxes

Ecommerce and online retail has made buying and selling the goods we want so easy. For both business owners and consumers, everything we want is just a swipe away. This comes with some complications given the sales tax variations across states in the US and international sales. 

Keeping track of these complex regulations can be a nightmare for a small business owner, regardless of how much or how little income you are generating. Accounting solutions can keep you up-to-date on the taxes that can impact your business, some can even do it all for you. 

Import Taxes

Depending on your business’s model and what its initiatives are, you may need to export and/or import goods for sale. These tax ramifications and duties can be expensive if they’re not handled correctly. 

Small Business Loans

Whether you’re starting your small business or you need some capital between the slow times, a small business loan is not something to shy away from. Low sales, big growth goals, or something to tide you over between your seasonal highs and lows, being able to procure a small business loan is important for your business. 

Obtaining this funding requires a lot of documentation in the form of financial statements. Whether that be income statements, cash statements, or even tax documents, all of this will only lend weight to your loan applications. Not to mention a detailed proposal detailing the amount of funding you’ll need, your plans for it, and the return on investment you hope to gain. 

These loans are based on your credit history, previous sales’ history, and the fiscal outlook of your small business. Accounting software will keep track of all these important documents so they’re accessible when you need them most. 

Small Business Accounting

Whether you’re searching for accounting software solutions or trying to hire an accountant, you probably have a lot of questions. Chief among them is about how much you should expect to pay for these integral services. How much do accountants cost for small businesses? Should I look for an accountant or do I need a whole firm? All of these answers are dependent on the financial model and needs of your small business. 

There’s no one size fits all accounting model - each small business has different financial needs and should be dealt with accordingly. With the help of accounting experts at Inspired Accounting, you can have all your questions answered. Armed with the right information, you can make the right accounting solution for your small business.