Step-by-Step Process of Setting up Accounting Services for Small Businesses

If you run a small business, you probably have to deal with many day-to-day administrative tasks, such as bookkeeping.

As a commerce proprietor, bookkeeping is likely the final thing you need to stress almost. In any case, keeping up legitimate bookkeeping is critical to business growth and success. After all, every penny saved is a penny earned. Even if you decide to hire an accountant or freelance accountant in the near future, it helps to know at least the basics of accounting. This allows you to track and operate your business more efficiently. This guide will explain everything you need to know to do accounting services for your small business.

What is Small Business Accounting?

Small Business Accounting is all about tracking all the money that goes in and out of your business accounts and compiling that data into financial reports that you can analyze and use to improve your business. As a small business owner,  the most common accounting activities  are: 

  1. Daily bookkeeping 
  2. Invoicing 
  3. Monitoring cash flow to cover all future expenses.
  4. Pay attention to your debts and accounts receivable. It’s important to know if your customers are paying on time.
  5. Preparing Financial Statements and Reports 
  6. Filing Tax Returns Tracking all of the above using various spreadsheets and physical folders can quickly become time-consuming and tedious.

This is why most businesses today utilize bookkeeping computer programs to mechanize most of their bookkeeping exercises.

Bookkeeping computer program comes in the form of a desktop application or a cloud-based app. Both types of software help you perform similar accounting operations, but cloud-based accounting software has the added benefit of being able to access your accounting data anytime and on any device you like.

Learn in detail how to use cloud accounting software to automate most accounting services processes for your business. Before we get started, let’s explain some important accounting services principles and terminology.

How to Set up Accounting Services For Small Business

Choosing an Accounting System 

The most important thing you need to decide when doing accounting for a small business is the type of accounting system you want to use.

Choosing an intuitive and user-friendly system will streamline your company’s entire accounting process and save you a lot of time.

Interestingly, however, in 2021, many business owners still believe that using a checkbook is an efficient way to manage their company’s finances. Realistically, that’s not the case. 

First, it can hinder your ability to grow your business. As you start scaling, it becomes increasingly difficult to organize and maintain accurate records of all your transactions. If that’s not enough, just think of the hassle you’ll have to go through when the IRS comes thumping on your entryway to gather your taxes. Currently, there are three main accounting systems available to small business owners.

Manual systems (such as paper or spreadsheets) 

You can organize different accounts and financial reports into separate spreadsheets. However, you will have to manually track and enter each transaction and make sure everything balances at the end.

Automated accounting systems (such as accounting software ) 

Accounting software allows you to automate most accounting tasks, including recording journal entries, calculating payments, or preparing financial reports.This not only saves small businesses a lot of time but also improves accounting accuracy.

Enterprise Resource Planning (ERP) Software (e.g. SAP) 

This type of software solution typically costs  $10,000 or more per month, depending on your business needs. This is primarily used by businesses, so it is less relevant for small and medium-sized businesses. Now, you may be wondering. Why choose a manual “spreadsheet” system when you can use online accounting software? Well, a manual accounting system is best suited for very small businesses that have few or no employees and don’t handle inventory. Works well for small businesses. If all you care about is tracking money going in and out of your business,  a simple spreadsheet will suffice. However, for other small and medium-sized businesses, choosing online accounting software is a better choice. 

Open a Commerce Bank Account

The primary step after you’ve consolidated your trade ought to be to open a trade bank account. It is important to separate business finances from personal finances. First of all, it makes it much easier to track the performance of your business. It also saves you a lot of time and stress when it comes to filing your taxes.

Determine Accounting Methods 

There are two main types of accounting methods: single-entry accounting and double-entry accounting. The main difference between the two is that itemized accounting requires only one input for each commerce exchange you perform. This implies that, as it were, one account is utilized.

Double-entry bookkeeping, on the other hand, contains two sections for each exchange, and two accounts are utilized. One of the accounts is charged, and the other one is credited. Moreover, single-entry bookkeeping is based on the cash-accounting strategy (its fundamental center is to record cash when it is gotten and installments when they are made).

Track All of Your Commerce Costs

Since the start of your trade action, you’ll have to track different exchanges and costs. The foremost principal portion of bookkeeping, particularly for a little trade, is keeping exact track of any fetches that commerce brings about. As a trade proprietor, this will assist you in analyzing and screening the development of your commerce.  So, how do you track your spending?

 1. Keep each receipt in an organized folder or file.

 2. If you use accounting software, keep digital copies of all receipts.

 3. Although the IRS says you don’t have to keep track of receipts for less than $75, it’s good practice to keep all receipts, with no exceptions.

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