A Comprehensive Guide to the Business Accounting Cycle
By special guest contributor Karla Lopez
Accounting is a vital aspect of every business operation. Hence, it is imperative for your business to build a reasonable accounting setup, particularly in the early stages, for it to move towards sustained and fast growth. As a business owner, how can you manage and keep track of your money effectively? Should you outsource financial tasks? Who can help you manage all the financial data of your business to make well-informed decisions?
For a little help, here’s a quick rundown about the best services and methods you can leverage to set your business up for success.
Have a Business Bank Account
Once you register your company, it is time to find out where you will be storing your income. Ensure to have a separate bank account for your business. In this way, it will make tax season less difficult.
And when it’s time to pay taxes, you will not have a hard time separating your professional and personal expenses since your business transactions will be stored in a different account. What’s more, it can help enhance the financial health of your business with ease.
Shop around to find a bank that is easy to access in-person and online. Be informed of how much you will be charged every month before you decide on a bank that fits your needs. When you’ve found the right bank, open a business savings account, and a business checking.
Doing so, you can keep your business transactions organized. Lastly, think about getting a business credit card because it is very helpful for establishing the credit rating of your business.
Build a Bookkeeping System
Not all business owners like bookkeeping. However, they need to do it. It is a prerequisite. Take note that bookkeeping and accounting are different. Don’t be confused about these two terms. Bookkeeping is a daily process of recording money coming in and out, categorizing them, and coming to terms with bank statements.
On the other hand, accounting is more complex. For the most part, it makes use of data from your books to check the financial health of your business and tactically plot the growth of your business.
With these in mind, we can say that bookkeeping is a round-the-clock task. If possible, you need to ensure it is finalized every month for you to have new financial statements on hand. Plus, an updated understanding of the performance of your business.
In terms of selecting the best option for getting things done, it is wise to reflect on the time you can invest in your books every month and your level of financial understanding. If you would like to focus more on other things, then outsource the task.
Have an online bookkeeping service to handle your bookkeeping. Or you can do it yourself by using an Excel spreadsheet or accounting software.
Keep Tabs On Your Expenses
Most expenses of a small business are tax-deductible. Also, you can subtract specific business startup expenses. However, for you to declare an expense as a tax return deduction, you have to track your expenses.
Relying upon how much expenses you are making, keeping tabs on receipts and organizing them can be quite taxing. Fortunately, technology and apps have significantly cut down the amount of time business owners have to spend doing this task.
To build an excellent recordkeeping system, you need to know what business expenses you need to track. Generally, you have to keep previous tax returns, financial statements from your bookkeeper, proof of payments, invoices, canceled checks, bills, bank and credit card statements, receipts, and many more. But the IRS does not require you to retain receipts under $75.
Moreover, take note that the IRS is well-known for investigating particular deductions. Thus, you need to pay more attention to some of the records. It includes vehicle-related expenses, business travels, meals and entertainment, home office expenses, and business gifts.
Find Out How You Will Get Paid
Before you even launch your business and start selling products or services, you have to understand how to accept payments. Nowadays, it is unlikely that you will be paid in cash. Therefore, you have to look for a payment solution that fits your business.
The following are three ways how you will get paid:
- Online payments
- POS (point-of-sale) payments
- In-person and POS system payments
Takeaway
Undoubtedly, launching a business can be a complex endeavor, and even more when it comes to your business accounting. So that you can keep a successful business, modify and review all your approaches to business accounting. With online services like DPS Accounting Perth and apps, you can always have updated knowledge about your business’s financial health.