20 Dec What Small Businesses Need to Know About Accounting

Before running into issues, consider hiring a bookkeeper, or automate your accounting practices with one 10 free bookkeeping templates in excel and clickup of the many business accounting software tools available to you. In this blog, we’ve curated our top accounting and bookkeeping tips that’ll help organize your finances, prevent liquidity issues, and grow your small business. Few small business owners are accounting experts, but to be successful, it helps to know a little about how to do accounting for a small business. Learn how to build, read, and use financial statements for your business so you can make more informed decisions. Our intuitive software automates the busywork with powerful tools and features designed to help you simplify your financial management and make informed business decisions.

Forecast future expenses and income

FreshBooks is suitable for small business owners, self-employed professionals, freelancers, and businesses with employees. For LLCs or corporations, having a different bank account is important because a separate account for personal finances helps with filing taxes. Note that you’ll need to pay some payroll taxes, such as FICA taxes, to the IRS outsource accounting services for small business and start ups monthly or sem-weekly, depending on the amount you withhold. However, for FUTA taxes, deposits are typically due quarterly, and you’ll file your FUTA return (Form 940) annually. You already know this, but just to make sure it’s crystal clear, taxes are ridiculously complicated.

steps to successful small-business accounting

Most small business owners aren’t accountants or security and medicare bookkeepers by trade. However, learning the nuts and bolts of accounting is essential, no matter your background. Your company’s financial documents can provide valuable insights into what to focus on, change and strengthen — and you should be able to read and understand them on your own.

When companies use bank finance to fund their daily operations, they often struggle to pay back the high-interest debt. Do adequate due diligence before taking on any external funding. Start by documenting expenses, then classify them into appropriate categories such as bill payments, vendors, administration, or miscellaneous.

Keep Your Receipts

1. Larger capital expenses often come up during slower months so plan ahead to avoid a cash crunch.
2. To create this chart, you’d first organize your accounts into specific categories, then further break your organization down into relevant subaccounts.
3. Of course, if the demands of running a business mean you just don’t have time to learn QuickBooks, or if you’d rather leave your bookkeeping to a professional, try Bench (that’s us).
4. Having an apportioned salary for the business owner is an accepted business practice that helps you reinforce the business’s distinct and legal standing.

Large and inventory-heavy businesses may need to use the accrual method. Software programs, apps, and tools can save your business time and potentially money if you’re able to ensure more accurate accounting. Using a software program can also eliminate the need to retain a full-time accountant, which can add to your business expenses.

Keep Track of Cash Payments

You might be tempted to place bookkeeping and accounting at the bottom of your to-do list, but following the right procedures can set your business up for success. You might be able to get away with keeping your own books in the beginning. But, as your company grows and tax time approaches, you might feel a little big lost. Fees for incorrect tax filing or messy bookkeeping can be high, not to mention the time you spend in correcting errors. Get a free Wrike trial to establish a predictable cash flow system, eliminate the guesswork in accounting, and achieve small business success.

Other accounting services small businesses may use include bookkeeping, strategic finance, and tax accounting. Accounting or bookkeeping software is a good middle-of-the-road option, both in terms of how much hands-on bookkeeping you want to do and how much you want to spend on accounting software. A bookkeeper records income and expenses and categorizes them for specific periods. An accountant, meanwhile, helps file taxes and sets up the accounting backbone of the organization. The cash basis is easier to use, but the accrual method of recording transactions gives you a clearer picture of actual revenue and expenses during a particular period. Most small businesses that don’t carry inventory choose the cash basis.