Business accounting is the heart of any organization because, without proper accounting, it is not possible for a business to determine whether it is making a profit or not.
Large companies generally have their own financial or accounting department, so the professionals over there take care of the accounting staff.
However, a small or medium business owner cannot afford to hire a financial professional and that’s why they themselves have to take care of everything.
So, are you facing challenges with your business accounting as a small business owner?
No problem, today we will describe bookkeeping for small business hidden secrets medium Matt Oliver inside out that will help you to know the hidden accounting secrets
What is The Importance of Accounting in Business?
In case of an online shop, regardless of how many sales you make, if you don’t have control over the accounting segment of your resale business, things may not run efficiently.
You need to go through the essential elements of your business from an economical angle
because the number of sales or cash flow is not enough to understand the exact position of your business.
This is why accounting for a business is important.
Basic Accounting Concepts for Small Companies
In order to have a clear knowledge of the financial capacity of your small business, you need to understand the concept of accounting for small businesses. That’s why you need to stay clear about your financial statements such as how much your business is making, how much you are spending and if there’s any profit or loss, etc.
Here you will find some information about small business accounting.
Hidden Secrets of Small Business Accounting
Every business requires logical accounting–this is the ultimate and basic concept of accounting. However, there are some secrets, tips and tricks that you can apply for rational accounting; here’s what they are:
Matt Oliver said, “ the balance sheet is just a picture or snapshot of any organization that contains all the liabilities, assets of a business and owner’s equity information of a particular time”. Analyzing the same, a company can determine the health of the business.
It means a balance sheet will have information about your current assets (savings/current account), loan receivable information, dues and current liabilities, etc.
A balance sheet is one of the primary financial statements that Generally Accepted Accounting Principles (GAAP) requires.
Finding any type of financial statement becomes easy if you can keep all the recordings of your financial translation in one place. A book can consist of all your financial transactions on a day-to-day basis and other information that is related to the business.
As Matt Oliver stated, the primary goal of accounting is to record and sum up all the financial transactions in such a form that can be used later to get any type of financial information. This is not only applicable for a business; an individual can also implement the same to maintain their finances.
Companies generally use a computer or a ledger or a hybrid system where they use the computer and physical files to keep their financial activities recorded.
It is generally the amount that an owner earns by activities like sales and other business operations.
If the equity of the owner decreases, it can be counted as an expense.
Capital refers to the cash and liquid assets that the entrepreneurs have contributed to their business. Capital can be cash, real estate properties, receivable accounts, or machinery. Even the excess amount that gets left after expenses is also considered capital.
Expenses mean such an amount of money that a company incurs in order to generate revenue. Basically, expenses are those types of activities that subtract the money. It includes loans, interest, giving salaries to the employees, water and electricity bills, etc.
Select the Accounting Method
First, you need to select a suitable accounting method for your business before filing your first tax return.
Accrual Based Accounting
This is a bit of a complicated method where the money is “won” rather than money received. So, for example, if someone deals a large contract with the company, it’ll be treated as money “won” from the customer.
This is actually pretty useful for SMEs when they need to inform their investors or make any decisions that need fast approvals.
Cash Basis Accounting
This is a very basic type of accounting where all the incomes and expenditures are tracked.
What kind of Records Should You Keep?
There are some important records that a small business owner must keep in order to track the progress of the company.
The documents reflect the income, expenses, deduction charges, and credits on the tax return. These documents will contain:
1. Documents that show items of income, deduction, or credit shown on tax return
2. Previous tax returns
3. Forms W2 and 1099
5. Previous tax returns
6. Proof of payments
7. Financial statements of your accountant or the bank
9. Cancelled Cheques
11. Credit cards and bank statements
You should keep all of these documents very carefully before sending them to the tax collector. Keep all the documents that show records of the past three-five years.
Accounting Control Checklist
This checklist is required to maintain your valuable books.
Weekly Accounting Task
- Always file or digitize your receipts to keep them in order.
- Keep your transactions categorized as they are classified differently on your tax return file.
- Always keep track of your transactions by entering them on your accounting software or Excel sheet.
- Make sure to pay the vendors on time and other bills as well. This will help you avoid paying interest.
- Send invoices in a short time.
- Try to manage your cash flow especially in the starting year of your business.
Monthly Accounting Tasks
- Always be aware of your financial situation and ask yourself some questions before investing your money in trading.
- Keep reviewing your pending invoices. This’ll ensure proper cash flow.
- Keep reconciling your bank accounts. Then, when any income or expenditure gets out of control, it will protect you.
- Review both the monthly profit loss budget with the prior period to measure your earnings.
- Compare the actual profit loss with your budget and prior period.
- Review payrolls before paying tax.
Small Business Accounting Hidden Secrets
Organization and planning are two of the most important things to keep your accounts up to date. This will save you time and money.
You should also learn some basic accounting; this will help you understand your business’s financial prospects properly.
As this article explains bookkeeping for small business hidden secrets medium Matt Oliver, it becomes easy to understand the details about business accounting.
Now you can make effective financial decisions for your small or medium business.