Reading tax forms, maintaining books, checking bank account statements, sending invoices and creating a budget for business activities sound boring and dull. It’s a common belief that only those who studied to be accountants can enjoy it. But the truth is every successful business owner needs to learn the basics of business accounting because it’s all about managing money and time.
Those who hate accounting, here are simple steps to make business accounting fun.
Accounting for small business owners
Learn the basics
The heavy terminology strikes fear and nervousness. Poor business accounting can not only create problems in the short term, but it can also really bring some of the worst experiences in your professional life. When you stop seeing accounting as the biggest hurdle, it’s easy and fun. Don’t dig deeper in the beginning, just learn the lingo and get yourself familiarized with terms used in accounting. Here are some basic accounting terms with their meanings.
Bookkeeping: It is a part of business accounting. Bookkeeping is the process of recording financial transactions. If your records are well-organized, they can help you in many ways. You can compare financial positions and you can also plan future financial decisions. Most importantly, when your business gets audited, your records can save a lot of time and energy.
Chart of accounts: A chart of accounts is a complete list of accounts used in an organization throughout the accounting system. Each account provides a unique set of details for liabilities, expense, revenue, asset, and equity.
General ledger: A general ledger is a set of accounts used by a company for its accounting records. It provides a record of all the financial transactions of the company. On the basis of this key information, accountants prepare financial statements.
Cash & Accrual Accounting: The cash method of accounting records revenue and expenses when a company receives cash and when the money is paid. On the other hand, in accrual accounting, revenues and expenses are recognized when a company earns them, regardless of when the company actually receives or pays money.
There are many basic terms used in business accounting. So, when you start learning the basics, you can easily catch up with the other terms as well. In the same way that you check your mobile phone notifications every day, make business accounting a part of your routine. Create a schedule and do the following.
- Check the cash position in your business
- Record all the financial transactions
- Check how much money you expect to receive and pay in the current week and month
A business accounting software can be your best friend for managing your finances. Don’t just use software your friends use. If you rely more on desktop applications, choose software that supports your platform and start using it. Most of the software come with a guide or in-built product tour. If you can find video tutorials on how to use software, it will help you get started. There are much cloud-based software available for free, but if you need a premium solution, go for a paid one only after checking the list of features it offers. Cloud-based applications can be used on your mobile devices as well.
If you know an accountant, it would be wise to discuss the software features with the expert before you buy. There are several ways to know what reports and data your business needs to keep the finances in order. While choosing software, keep your internal data and tax authorities in mind. There are plenty of ways to learn about your business needs. You can take classes, and you can also read books. Use all the trustworthy sources to collect information.
Business accounting software can make things easy and simple. Seeing the cash flow and seeing how your business is making money is fun. If your software is the right fit for your business, it can be a very addictive tool.
Look for advice
Spend enough time trying to learn about accounting issues. Look for advice and follow updates on tax reforms and how they affect your business. The problem with many entrepreneurs is that they really don’t have time to learn business accounting. There’s so much work and you’ve got a company to run successfully. Filing tax is something you can’t delay.
Look for help from groups on social media platforms. If you can find a group of entrepreneurs in your city, it can be a great source of free advice. You can also ask your former employees about how they manage their finances and how they manage business accounts. They can connect you with the right people and even if they don’t, they can at least show you the right direction to look for the most relevant information and good advice.
Practice, practice, practice
Now that you have a lot of information, it’s time to document what you want for your business. Of course, you can’t learn everything in a day. Create a list of your requirements, if you feel that you need to learn basic details first, find the relevant information and start doing it. If you are done with the basics, try some popular accounting software. Many companies offer their software on trial basis. Don’t sign up for all, just start with the one you find most suitable. There will be limited functionality in trial software, but it will help you get a clear idea of where to start. If you feel comfortable with particular software, check what you will get after paying for the full version. There are several websites where you can compare such products. Read reviews, educate yourself as much as possible.
Business accounting isn’t scary. All you need to do is to start learning. Make it a habit. Here are some small goals you can start with.
- Check the position of cash
- Record all the financial transactions
- Document receipts
- Review unpaid bills and make payments
- Prepare invoices and send
- Check your inventory status
- Calculate actual profit and loss
- Compare available reports