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[GUIDE] The Ultimate Guide to Small Business Accounting

Updated: May 1, 2019


Accounting can feel daunting, especially if you are a new business owner. Check out this handy guide to small business accounting and stay on top of finances.

Operating a business is no easy task. If you're just getting started, you may have been ill-prepared for the coming financial management. 


As a small business, managing your finances can feel like an incredibly daunting task. However, with a little knowledge and practice, you can easily and quickly get your business finances in order. 


Continue reading this guide to small business accounting to help you gain control of your business finances. 


Set Up a Bank Account 


Once you have an idea for a business and get the ball rolling, you need somewhere to store your business's money. This is where you'll store business income and pay important bills. 

For some legal business structures, you may need to have a separate bank account from your personal account. These include LLCs, corporations, and partnerships. Sole proprietors don't need to have a separate business account, but it may help. 

Before you open a business account, you should shop around at different banks. You'll need to consider fees, interest rates, and customer benefits. 


Not all accounts are equal in nature, so it'll pay to do some research


Beyond your primary checking account, you may need to consider setting up savings accounts. This will help you save for future business expenses and taxes when they come due. 


Bookkeeping Essentials 


Bookkeeping is the process by which your business keeps track of all business transactions. This means debits and credits to and from your accounts. 

A bookkeeper's job is to record all expenses, sales, and bank transactions in a central ledger. This ledger is one of the most important aspects of your company's financial well-being. 


Bookkeeping also includes recording invoices and payroll. 


Some small business owners choose to tackle bookkeeping tasks on their own, while some choose to hire a professional. There are many viable bookkeeping options to choose from. It's easy to find one to suit your business. 


There are a few key characteristics you need to look for if you're looking for a bookkeeper or bookkeeping service. These include attention to detail and desire for accuracy and completeness. 


Tax Obligations 


Depending on the type of business you operate, you may have different tax implications from other types of businesses.


For example, self-employed individuals can claim business income on their personal tax documents. This is consistent for those who operate a sole proprietorship, LLC, or partnership.


If you're self-employed, you should take special consideration to plan for your tax obligations. You may need to pay quarterly estimates on your income. This is usually true if you'll owe more than $1,000 in taxes for the year. 


Even if you don't pay quarterly estimates, you'll need to consider putting money away for your future tax bill. 


On the other hand, corporations must handle their income a bit differently. The corporation itself is subject to taxes separate from the owners. Income you make as an owner is taxable as though you're an employee.


Corporations are taxed in a manner similar to individuals. Depending on the income of the corporation, it may need to pay more or less in taxes. 


Small Business Accounting Basics 


Good accounting is essential to the survival and well-being of any business of any size. Accounting is the process by which businesses process, measure, and communicate financial information. 


Accounting provides business owners with vital information concerning business finances. This information helps owners determine available resources, financing, and the business's financial health. 


Proper accounting can help businesses in a variety of ways. It can help a business manage cash flow, prepare tax documents, and more. 


The type of accounting services you choose may depend on the size and extent of your business. 


For some businesses, a bookkeeper can handle basic accounting tasks. Some businesses may choose to hire an in-house accountant. 


For larger businesses with more revenue, the business may need to outsource accounting to a larger firm. 


Why Outsource Your Accounting 


If you operate a small business, you may wonder why you might choose to outsource your accounting efforts. There are a few different reasons and benefits you might choose to outsource your small business accounting


The biggest reason you may choose outsourced accounting is so that you can focus on building your business, not doing your finances. Whether you do it yourself or manage someone that works for you, this takes you away from your business. Outsourced accounting is a also a great alternative for businesses who don't need a full-time accountant. Many businesses we we work with keep their accountant and use Ceterus to alleviate the day-to-day manual tasks they don't want to burden their accountant with.


This could have a great impact on the finances of your business. Outsourced accounting reduces costs as well as saves you time and money, especially at the end of the year.


Regularly Manage Your Methods

 

When it comes to business, you need to keep up with your needs and demands. As your business grows, your business may outgrow your methods. 


For example, you may start out using simple spreadsheets to keep track of your finances. As your business grows, your finances may become more complicated than what can fit on a spreadsheet. 


You may need to expand to an accounting program or even outsource your efforts. 

As you move forward with your business, you should regularly assess your methods. This will ensure you're taking proper control of your finances. 


Evaluate Your Accounting Needs 


Each business has different needs. Sit down and take a look at your finances and decide what you think are your best accounting options. 


Proper bookkeeping and accounting are essential to the financial well-being of your business. They give you an clear picture of where your business stands and any changes you may need to make. 


Small business accounting can get messy and complicated, but don't hit that panic button. Check out our accounting solutions to find out how we can help. 

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