Bookkeeping 101: A Simple Guide to Basic Accounting for Small Business
Your desk has a stack of paper and receipts, but the thought of talking to a tax preparer makes you want to cry. Why? Such a situation can only occur when you have an accounting mess that you have no idea how to fix.
Most of the time, you fear talking to a tax professional because you know you are in a mess, but you don’t know how you got there. Do not fret when in such a situation because there is always a way out, no matter how grave it may be. Understanding basic accounting for small business may be the only way you can be sure to get your books in order.
However, you may not know where to get enough information about basic accounting. Do not worry because we have collected the following tips for you.
Understand Accounting Terms
You may have created that mess because you did not understand accounting terms, which made you misinterpret them. Some of these terms may seem simple when viewed from a layman’s understanding, but they may mean something else. Some of the terms you need to master include:
- Cash basis accounting
- Generally Accepted Accounting Principles (GAAP)
- Accrual basis accounting
- Accounts receivable
- Accounts payable
It may take time to master these terms, but they will become part of your accounting language as you get used to them.
Know the Common Accounting Reports
Some business accounting reports will be used every day to analyze information and come up with recommendations. These are the reports that indicate the state of your finances, and so you have to know how to prepare and present them correctly. Here is a look at some of these reports.
Profit and Loss Statement
You must have heard experienced accountants talking about profit and loss statements all the time. It is because it is one of the primary documents used to prepare your tax information and when applying for lending. Because of that, you have to enter accurate figures in every field and calculate them accordingly.
This statement can be easy to come up with if you have the information because there are fields indicated for you to fill. You should enter all key metrics such as revenue earned, expenses, gross margin, cost of goods, and profit. If you have accounting software, it will be easier.
A balance sheet gives a clear overview of your business at any given time. The entries into this sheet include capital, assets, and liabilities. Please note that these entries all provide an understanding of how much your business is worth.
Cash Flow Statement
Suppose you want to track and categorize every expense and earning, create a cash flow statement. This statement is one of the essential tools in accounting basics because it helps you monitor your company’s financial activity. As a result, every entry on the report will be a financing activity, investment activity, or operating activity.
Prioritize Fixing Accounting Messes
No matter how careful and professional you are, some mistakes happen. They could be minor enough to fix in a flash, but some can leave you in big trouble. Instead of panicking when you get into an accounting mess, you should prioritize fixing it.
Here is how to fix most of these messes.
Get Back on the Right Track
The first step to clean the mess is to realize that you are traveling in the wrong direction and stop. Identify where you went wrong so that you can go back and start again. Sometimes, the big messes result from many years of neglect, and therefore, you may want to change your management style.
Get the Right Tools
If you think that the mistakes were brought about because of wrong accounting tools, it is time to get new ones. Upgrade your systems or get new ones altogether to improve accuracy and efficiency. If your business is having difficulty with leasing accounting, you can contact a lease accounting software company and learn more about their solution. In addition to that, you may want to automate all processes so that you do not have to worry about human error anymore.
Regular reconciliation of transactions helps you stay ahead of the game by keeping every record up to date and helpful. It will make it easy for you to track every entry into your books and easily prevent mistakes. It eases the workload to make things even better because you will not find yourself with that stack of papers and receipts that stress you up.
Outsource Basic Accounting for Small Business
There is no doubt that most small businesses are overwhelmed with tasks, making it difficult for them to take care of their financial books. Because of that, you may want to consider outsourcing some of your bookkeeping services to companies such as Taxfyle for better management.
Here are the benefits of outsourcing accounting tasks to professionals.
Access to a Better Skill Set
You may never have the capacity to hire experts like those you will find when you outsource accounting services. These independent firms often have some of the best minds in this industry, and so, you can be sure of better-quality services than what you would get from your in-house team. They also have enough time to counter-check every detail for accuracy.
How much time do you spend on accounting and bookkeeping tasks? You can save it by outsourcing accounting for beginners and other tasks. Use that time to improve your organization.
Another advantage of outsourcing accounting services is the elimination of salaries that you would pay in-house bookkeepers. With contractors, you only pay for the hours worked. It is one of the best ways to save costs for small businesses.
Get Small Business Accounting Help
After knowing basic accounting for small business, you need to find the right people to work with. Outsourcing these services is the best approach, but only when you give the tasks to qualified people. Contact the best agency today and see how much your bookkeeping changes for the better.
This guide is one among many that we have published on our website.