You will need to take care of the bookkeeping duties that come with running a store as soon as your small business opens. Even though accounting might not be the most fun aspect of expanding your company, getting off to a good start is essential. We’ll go over all you need to know about small business accounting in this guide, along with some top accounting software options to think about so you can cross that task off your small business finance to-do list.
QuickBooks displays all of your expenses over time, including inventory and maintenance costs as well as each sale your company makes. Additionally, it provides inventory automation through the use of perpetual inventory tracking, which updates your sales and inventory costs each time a sale is made. Integrating QuickBooks with Shopify is another way to keep things current and organized.
What is Accounting for Small Businesses?
A collection of financial operations for the processing, measurement, and sharing of a company’s financial data is known as small-business accounting. Taxes, management, payroll, purchasing, and inventory are some of these tasks.
Accounting Basics for Small Businesses
The following points need to be considered to know about the tax tips for small businesses.
Open a Bank Account for Your Small Business
In the unfortunate event of bankruptcy, litigation, or audits, your assets are safeguarded by having a separate bank account for your business. Good company financial records might boost the chances of approval if you seek money later on from creditors or investors.
First, open a checking account. Then, open any savings accounts that will assist you in setting up an emergency fund and making tax plans. As an example, you could open a savings account and use a portion of every paycheck to cover your self-employed tax withholding. Setting aside 25% of your salary is a decent general rule of thumb, however high earners may need to estimate closer to one-third.
Keep a Record of Your Small Business Spending
Accurate and efficient expense monitoring is the cornerstone of sound business bookkeeping. It’s an essential stage that enables you to create financial statements, track deductible spending, prepare tax returns, and validate your files in addition to enabling you to monitor the expansion of your firm.
Create an accounting system right once to keep receipts and other pertinent documents organized. You have two options for this process: employ a service like Shoeboxed, or keep it simple and traditional. Although it’s not required by the IRS for US store owners to save receipts for expenses under $75, it’s still a wise practice.
Five different kinds of receipts require close examination:
Entertainment and Meals
It’s a fantastic idea to hold a business meeting in a restaurant or café, but make sure to record everything. Note who was there and why the lunch or outing was planned on the back of the receipt.
Trip Outside of the City
It is frowned upon by the IRS and CRA for individuals to submit personal costs as business expenses. Thank goodness, your receipts offer a paper trail of the business you conducted while you were away.
Expenditures about Vehicles
Once you’ve documented the where, when, and why of your business car use, apply the usage % to your vehicle’s related expenses.
Gift Receipts
It is important if the giver attends the event with the recipient when giving something like concert tickets. Should they do so, the cost would be classified as entertainment instead of a gift. Check the receipt for these specifics.
Revenues from a Home Office
You must determine what portion of your home is used for business, just like you would with car expenses, and then apply that percentage to home-related expenses.
Create an Accounting System
The routine accounting procedure of documenting, classifying, and balancing bank statements is called bookkeeping.
Accounting is a high-level procedure that examines the performance of businesses and interprets the information a bookkeeper gathers for financial statements.
Install a Payroll System for Small Businesses
A lot of internet retailers begin as one-person operations. However, there comes a point in a small business owner’s life when it makes sense to bring in outside assistance. You must first determine if the person in question is an employee or an independent contractor to proceed.
You must establish a payroll plan for your staff and make sure the appropriate taxes are being withheld. Numerous services are available to assist with this, and payroll is a function of many accounting software packages.
Conclusion
Establishing a business can be a daunting task. You may start your new store with sound financial management if you do your homework on banking, transaction management, fundraising, and other accounting-related topics. All of these tasks—from choosing the best kind of company credit card to open to estimating the income per product—will help your business succeed both now and in the future.
Although it is more time-consuming, laborious, and prone to human error than complete small-business accounting software, you may set up the fundamental accounting records for your small business on a spreadsheet. You should at the very least use a safe cloud-based platform to track your revenue and expenses.
