Surviving in today's busy world!
Accounting is by far, one of most important aspects of starting and operating a business. It’s so easy to get caught up in the startup glamorous tasks of designing a business card or choosing a business name, yet without a solid understanding of the numbers you may not survive.
The streets of entrepreneurship are littered with former business owners who ignored the financial side of business only to discover too late they were operating at a loss not a profit. Without a firm grasp of your margins and cash flow, you can price yourself right out of the market.
Over 28% of businesses declaring bankruptcy cite problems with the financial structure of the company as the main cause of failure, according to a Small Business Administration study, "Financial Difficulties of Small Businesses and Reasons for Their Failure." Take the responsibility of entrepreneurship by learning the basics of accounting.
Learn a few basics of accounting and bookkeeping for your business.
Many new business owners are intimidated by the mere idea of bookkeeping and accounting. However, with a little knowledge, the fear can be taken away. Remember this, bookkeeping and accounting share two basic purposes:
- to keep track of your income and expenses, which improves your chances of making a profit, and
- to collect the financial information necessary for filing your various tax returns.
There is no requirement that your records be kept in any particular way. As long as your records accurately reflect your business's income and expenses, the IRS will find them acceptable. However, some businesses are required to use a certain method of crediting their accounts by using either the cash method or accrual method.
Depending on the size of your business and amount of sales, you can create your own ledgers and reports, or rely on accounting software. Usually, accounting software is the easier method.
Three Steps to Keeping Your Books
The actual process of keeping your books is easy to understand when broken down into three steps.
- Keep receipts or other acceptable records of every payment to and every expenditure by your business.
- Summarize your income and expenditure records on some periodic basis (daily, weekly, or monthly).
- Use your summaries to create financial reports that will tell you specific information about your business, such as how much monthly profit you're making or how much your business is worth at a specific point in time.
Whether you do your accounting by hand on ledger sheets or use accounting software, these basic principles are exactly the same.
We understand that selecting an accounting firm is a very important and personal decision for most people. Our goal is to make this decision as easy as possible.
Feel free to call us for any questions or an initial free consultation.
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