Do you dream of having your own business? Perhaps you've already started collating
small business loan requirements so you won't have a difficult time transacting with the lender. Well, if that's the case, kudos to you because you don't dilly-dally. Your swift action would ensure your loan request would be processed right away, and you could get started with your business in no time.
Now supposing your business is already up and running. The next thing you need to do is get everything in your office ready. It doesn't matter if you're merely operating from a home office; you need to get everything in order to ensure smooth-sailing for your business. One of the things you need to work on is your business' accounting needs.
Accounting is an essential part in the success of your venture. If you want to corner the market, certain accounting issues must be factored in. Basically, small business accounting deals with the following: cash management, profitability management, inventory management, government tax compliance, payroll compliance, shareholders account, and operations management. Even simple cash advances could have a bearing on your business' financial flow if these are not properly entered into the accounting books. Maintaining these accounting concerns is a must. Failure to do so can result in unexpected losses, or worse, bankruptcy.
Tax penalty fees, overdue notices, and unbalanced checkbooks are just some of the unfortunate things that can happen when business owners fail to do proper accounting. These potential risks basically explain why small business accounting involves the use of modules that can guide entrepreneurs in managing their business. Examples of such modules are banking, account receivables (sales), payables (liabilities), payroll, and inventory. These modules must be checked and reviewed consistently to avoid losses.
Given the risks of simple error, fraud, theft, etc., double checking bank statements and accounts is truly vital. Bank reconciliation, which is the process of comparing a company's bank statement as provided by the
banking system with the company's own accounting records, is an essential part of small business accounting because it allows the entrepreneur to uncover any possible discrepancies in business transactions.
When it comes to sales and receivables, using bookkeeping software can help. More often than not, entrepreneurs feel the need to file paper copies of invoices. However, this is not absolutely necessary, though, because paperless filing can do the trick just the same.
Account payables, otherwise known as liabilities, are anything that a company owes to another person or organization. To have a snapshot of a company's finances, one must not only look at the assets because looking at one's liabilities is just as important. In general, accounts payable must be paid off as soon as possible to avoid default. If part of your personal finances is in the business, proper accounting can help
raise credit score.
In terms of payroll, the most important thing is to make sure that all staff is charged to appropriate accounts. In addition, accounting reports must include costs of wage premiums (overtime), training, safety equipment, etc.
Small business accounting requires very accurate inventory because even the slightest error can affect the entire business. The reflected amount of inventory in financial statements can virtually affect the following: cost of goods sold, gross profit, net income, amount of current assets, working capital, total assets, and owner's equity.
This is just a brief overview of what you can expect from small business accounting. By having a close look at one's financial records can truly give a company a good picture of its current status as well as the picture of where it is going.
