Updated: Mar 30
If you own a small business, most probably you have tried to manage your accounts so you are able to know when you make losses and profits. It is a good idea to keep accounting records as it helps you to understand how your expenses and revenues are flowing, and from this information you may understand what to do to boost the performance of your business. However, not many people know how to go about accounting and most of them resort to speculation when making decisions.
Use these guidelines for accounting to enhance the performance of your small business.
You need a bookkeeping system
Simply defined, bookkeeping is the record keeping process you perform each day in your business. These could be expenses, revenues, or even transactions. As a small business, you should choose which bookkeeping method to use. You may go with the DIY option of installing Quickbooks or you can outsource the work to a part-time bookkeeper. Lastly, you could decide to hire an in-house team, but most startups will not be in a position to afford this.
To record your transactions, you need invoices and documents that can show what transaction has been committed. If you are wondering how you can design an invoice, you can search for invoice templates online that will guide you through the process of designing your invoices.
Related: Claiming Dependents on Taxes
Cash method bookkeeping
In the cash method bookkeeping, you take revenues and expenses and record them as they are paid or received.
Accrual method of bookkeeping
The accrual method requires that you record revenues and expenses after the transaction has happened, and this also calls for the tracking of payables and receivables.
Setting up a payroll system
If you have employees or people who are helping you, it is important to have a payroll system where you can submit payments to your employees. If you are based online, you should have a system to distinguish between freelance accounting experts and workers from your in-house team. The system should log details to show the expenses you have incurred in paying salaries to your employees. You may also set up the payroll schedule so the money is deducted after every specified period of time.
Establish tax procedures
Taxation is a legal requisite for any business, and to ensure you don’t get on the way of the law, it is necessary to have tax procedures that help you to know how much you need to pay in taxes after each sale. This will help you submit your taxes in time and you could avoid penalties that come with declaring wrong figures. People may choose to boycott your business once they discover you have not been adhering to tax requirements, so consider this as important.
Setting up an accounting system for your small business is not a complex process. All you need is to ensure you understand all the requisites that should be availed to allow you to account for every transaction. The ideas given above are a good way to start, so consider them for your small business.