As a small business owner, you need to track, record, and analyze your business’s transactions to know its progress. While accounting may not be the fun part of the business, it is essential. It includes bookkeeping, making financial reports, and filing taxes. Discussed below are some of the things that small business accounting involves.
Open a Separate Bank Account
You need to separate your business finances from your personal ones. It will help you organize revenue and give you an easy time planning for the end-of-year taxes.
Record Both Income and Expenses
By recording your business’s income and expenses, you will be able to track transactions, prepare financial statements and monitor your business’s growth.
Select an Accounting Method
The two methods you can use are either cash-basis accounting or accrual accounting. Depending on the needs of your business and the stage it is at, you can decide which method best applies to you.
Generate Your Financial Statements
It is vital to generate a statement to gauge the financial position of your company. It will help you make better decisions and adjust where needed. The financial statement should include an income statement, a cash flow statement, and a statement outlining retained earnings.
Reconcile and Close Your Accounting Books
This is simply ensuring all the information within a specific period has been accounted for, and the information in your balance sheet and income statement is correct. After that, you reset back to zero and restart the process again. There is also a small business accounting software you can use to make the accounting process more manageable.
Keeping Books for a Small Business
While business accounting may look like a tasking job, here are some three steps to guide you:
Keep receipts on sales and purchases. The receipts include the amount, date, and any other information that can help you summarize your transactions.
Post the receipts into your ledger. This is just the summary of your expenditures, revenue, or anything else you are tracking.
Combine the data from your ledgers and create financial reports. The main reports include a balance sheet, profit and loss forecast, and cash flow analysis. With the information, you have greater insight into how your business is performing.
With an accounting system in place and your books in order, it is easy to look for lenders to help expand your business. If you are looking for a capital injection into your business, contact Commercial Capital Finance to help you out.
