Accounting plays a vital role in growing your business; in fact, it is the essential part. Accounting provides your business insights about your business’s conditions and the areas you need to pay more attention to. You can acknowledge the overall financial condition of your business. Not every person in a business can look after their accounts by themselves, so they seek accounting services. Accounting services can offer you more accuracy than yourself. They can provide a detailed report on your cash flow, hence revealing the hidden and potential opportunities for your business’s growth, and also they keep you up-to-date when the tax season arrives.
This article will discuss the fundamentals of accounting and some time-saving tips to help your business grow.
FUNDAMENTALS OF SMALL BUSINESS ACCOUNTING
it is time to understand the fundamentals of small business accounting:
Master Basic Bookkeeping: this term may intimidate you, but bookkeeping is all about keeping track of your financial statement. It is a part of accounting that records your business’s expenses and revenues. Profit is the blood of a company; without profit, no business can survive. To identify how much your business makes, you need to compare your business’s incomes and revenues; you can achieve it with bookkeeping.
Good bookkeeping may assist you with:
- Acknowledging if you are making a profit
- Letting you know if you are on the right financial path or inclining towards losses.
- Making tax season easy to handle by organizing for the tax filing.
Business tax returns filing: tax season is a headache for almost every business owner and freelancer. However, if one maintains good books, they can survive these periods with ease; not doing so can cause some legal troubles.
Various business taxes vary as per your state and the industry. Some of the examples include:
- Income Tax: under this tax, the taxpayer has to pay a certain percentage of their income to the government.
- Sales Tax: This tax depends upon the type of services you offer to your customers; you may include those taxes in your invoices and then pay to the government later.
- Employee taxes: if you have employees, you will collect your employees’ paychecks and transfer them to the government.
Generating financial reports: accurate accounting reports can help you make vital business judgments. You could go through a challenging phase deciding which technology would be cost-effective for you or what changes in the service you have to make that you provide to your customers, or do you need to hire a contractor. Several reports could help you make certain financial decisions, such as:
- Cash flow statements: these reports allow you to notice the cash inflow and outflow. This is the most important financial report that needs accuracy. Otherwise, it can lead to financial fatalities. It has been studied that more than 80 percent of businesses collapse due to inaccurate cash flow statements.
- Profit and loss report: this report allows you to recognize your business’s total income and expenses. You can not get as detailed data as in the cash flow statement, yet it is enough to overview where your business stands.
- Balance Sheet: balance sheet allows you to differentiate between what your business possesses for long terms and short terms.
WHEN DO YOU DECIDE IF YOU NEED ACCOUNTING SERVICES?
You need to seek accounting assistance when you feel managing them yourself is now interrupting your ongoing projects, or you may feel it’s better to hire an accountant during tax time.
Seeking professional financial assistance can help you in certain ways:
- It enables you to identify the most suitable company structure as per your needs.
- It can assist you in organizing your business’s financial documents.
- It can recommend you to open a bank account.
- It can assist you in administering your payroll process.
- It can help you organize your tax returns and identify the tax breaks in your business’s favor.
- It helps you close your books at the year’s end and generate financial reports.
- It can help you through the tax audit. (if needed)
HOW DOES ACCOUNTING SERVICES IMPACT YOUR BUSINESS?
The first and the foremost advantage of good accounting services is that it keeps you ready when the tax season hits. You can better understand the market’s current condition, changes in the customer’s demands, and other necessary details that will eventually impact your business’s growth. Having an organized and structured accounting can attract more customers. The points mentioned explain how good accounting services can help your business look great, especially to the customers.
- You get financial stability: having well-structured finances can help you recognize your cash flow status; you can make your business’s cash inflow and outflow. Therefore, you can generate a more precise prognostication of your business’s future income and expenditures so that you can keep the necessary allowances for the arduous financial period.
Your business’s quality can stay intact with steady finances, i.e., you don’t have to cut unforeseen costs or dismiss employees, etc., that would make your business compromise its quality.
- Enhanced efficiency: good accounting services can get you the most accurate data possible of your business, allowing you to make decisions most crucial judgments for your business as per the requirements, time, and investments. You will get insights into your business’s current needs, for example, the need for new technology, the need to change the contemporary marketing techniques, etc.
You can be more decisive of your business’s financial investments; you can choose the time to make certain financial decisions, such as deciding the appropriate time for business growth investments and how it will impact your cash flow.
- Better marketing: you can make better marketing decisions with better insights into your expenses and your cash flow pattern.
Having precise accounting information can help you choose the appropriate time to launch a campaign and understand if your efforts are reaping your sweet fruits.
WHAT ACCOUNTING SERVICES YOU CAN AVAIL OF?
As a small business owner, you must have essential tasks on hand, leaving you little or no time to look after your business’s accounting. It is where you need to get the financial services. You can either hire a bookkeeper or an accountant; you can either get a full-time or a Part-timer, hire an individual accountant, or outsource one.
To choose the appropriate and affordable accounting services, you need to consider various accounting services available to you; it could be outsourcing or online accounting services:
- Cost-effectiveness: small businesses may not have many requirements in terms of accounting. Outsourcing accounting allows you to pay for certain services of your company, hence making it a cost-effective option.
- Better internal prioritization: when you outsource accounting services, you have someone else to take care of them, so you can put your efforts into other vital tasks that contribute to your business growth.
- Better quality task performance: if you choose from an appropriate outsourcing firm, you will avail yourself of a specialized team of experts who will take care of your given task with the utmost expertise.
- Improper coordination: with an outsourced service, you may find the transition period a bit difficult, so it is essential to maintain proper coordination with the firm; if you cannot do so, you may go through time related or delivery related issues.
- Absence of control: outsourcing may not suit you if you want everything your way to the point, you may have no control over their working pattern, and there could be some parts out of control.
- You can’t fix anything at the last moment: you can not come up to the outsourced staff at the last moment and ask them to make certain adjustments and modifications. According to them, it is well planned and executed.
- It is efficient, simple, and convenient: with cloud accounting software such as Xero, it doesn’t take too long to install, set up, and start with your bookkeeping. It is entirely an online-based process. Therefore all you need to do is register, enter the required details, log in, and you can begin to use it.
- Enhanced security: accounting systems that offer features like access control, user authentication, strong data encryption, and network protection are not easy to breach. The data servers are stored in a secured location, and therefore, your data is safe.
- No installation, maintenance, and upgrade charges: no lengthy installation and setting up process can save you a tonne of time and money. A majority of such software follows a software-as-service model in which the user pays only for the services he has subscribed to.
- Paperless system: cloud accounting system is entirely digital; hence no paper is needed. You can save on the article, stocking and maintaining printing machines costs and space. You can save reports and documents on your system.
- Lack of specialized tools: accounting software such as Xero accounting may provide all the features that seem necessary for small businesses; however, it may not have the essential elements for a more specialized trade like construction.
- Demands more attentiveness for its security: cloud accounting is way safer because of its security features, but your team needs to avoid leaving your system vulnerable.
- May cost you ongoing charges: it may seem much cheaper to use cloud accounting, it is still a constant and continuous cost that becomes one of your ongoing overhead costs.
Accounting is an essential element of business management and some called it the language of business. Therefore, every small business managers need to assess how to implement basic accounting practices. The requirement depends upon the number of financial transactions and the nature of your business. However, you can practice it through cloud accounting or use a financial expert.