How to do Accounting for a Small Business

Posted on 03/05/20 By Lorman Team

Being a small business owner is challenging: you juggle countless responsibilities with often limited resources to ensure your business continues to run efficiently and successfully. Doing accounting for your small business may seem like another to-do in your long list of responsibilities, but it is a crucial element of your business that must be done with care to maintain an accurate perspective on your business' finances.

As a small business owner, you may not have the resources of a full accounting and bookkeeping department like a large corporation, but that does not mean you cannot successfully tackle your small business accounting on your own or with a small team.

Small Business Accounting Basics

Business accounting is the tracking and recording of financial transactions pertaining to your company. Bookkeeping and accounting are often used interchangeably but they are not exactly the same, though they are interconnected and work together to keep track of your finances.

Accounting allows for your business to summarize, analyze, and create reports from these transactions for differing business purposes such as taxes, regulatory compliance, and most importantly to keep a gauge on the overall financial health of your business.

Bookkeeping refers to the tracking and recording of each financial transaction of your business each day. This is done through a General Ledger where each transaction is classified into its proper categorization and then marked as a Debit (reduction of money) or a Credit (addition of money).

Accurate bookkeeping for your business will be an important tool in the successful accounting for your company.

Small Business Bookkeeping

With advances in bookkeeping software and the ability to link and import data from your business bank accounts, bookkeeping has become a much easier and automated task. Learning to use these tools effectively can save your business money and time.

By learning the basics of business accounting and applying what you know to the use of these innovative types of software, you will have access to many advanced accounting analysis and report capabilities that will allow you to successfully manage your business' financial records.

How to Do Accounting for Small Business

Accounting can be a complex topic but with the proper training on the basics of business bookkeeping and accounting, as well as the integration of some helpful tools, you will be on your way to keeping your business' finances in order.

Helpful tips for small business accounting:

• Automate as much as you can using software for payroll and bookkeeping, saving your company money and time.
• Develop an internal procedure for your company to track all business-related expenses and save all applicable receipts.
• Separate personal transactions from business transactions to ensure accurate records
• Keep a record of large purchases that will be considered business assets and must be tracked for depreciation.
• Track income and make timely estimated tax payments to avoid possible penalties.
• Use financial reports to make future projections, identify problem areas, as well as to focus on successful areas so that you can continue to adapt and grow your business as needed.

Lorman’s library of resources includes courses related to business and management that can help you tackle your day-to-day business functions, such as accounting and finance.

Build on your knowledge and understanding of business accounting and bookkeeping with our accounting courses for small business to ensure you are handling your finances accurately and effectively.