Small Business Accounting – What You Need To Know!customonecfo
Unless you are educated as an accountant and starting your own business, it is unlikely you know all you need to know about setting up your accounting and financial reporting systems. Small business owners have a variety of skills and abilities based on their education and experience when they start their business. Few know everything about running a business from administrative systems and specialty tasks such as calculating and reporting taxes, setting up accounting systems, and doing financial analyses. Owners must also judge how much of their time they have to spend trying to do those tasks themselves with everything else they have to do. A part of that evaluation is knowing the what accounting tasks are necessary for your small business.
What Accounting Means For Your Small Business
The most basic function of accounting is keeping track of the company revenue, cash flow, invoicing, and outstanding accounts receivable. There are a number of discrete tasks that must be completed on a daily, weekly, monthly, quarterly, and annual basis, such as:
- Daily checking your cash position – cash flow is the lifeblood of your business.
Weekly recording of transactions – invoicing, receiving payments, paying bills, etc. This includes keeping track of receipts for each transaction. At the end of each week, do a more in-depth cash flow review.
- On a monthly basis you need to balance your company bank accounts, review outstanding accounts receivable (A/R), analyze work flow and/or inventory, review your payroll and tax payments and review your Profit and Loss (P&L) statement against your annual budget, the prior period, and the same period in the prior year. You also review you balance sheet against the prior period and the same period in prior years to track your business performance over time.
- On a quarterly basis you utilize your monthly records to compile a quarterly financial statement that provides a consolidated P&L statement, payroll reports, sales tax records, and estimated income tax. Once these statements are reviewed and approved, you have to make all your payments to vendors, payroll taxes, income taxes, and sales taxes.
- Annually, you will roll-up all of your quarterly financial statements into an annual financial statement, perform the same reviews, and make your final fiscal year tax payments.
If you weren’t aware before, you can see that there is a lot of work involved in just performing these tasks. Doing it while trying to run the business is more difficult. Having the understanding to review all these reports, analyze them, prepare the proper reports, and make correct tax filings and payments increases the difficulty. This is the reason small businesses need to hire accountants, either a full-time accountant or a contract CPA firm such as CustomOne CFO & Controllers. Getting your company finances done correctly and avoiding penalties, while saving all YOUR time as the business owner for other tasks, is well worth the money.
In the final analysis, if your time as the business owner is valued at $100 per hour and it takes you 10 hours to do one of these tasks each week that is $1,000.00. Multiply that amount by the hours of other tasks the accountant will complete, multiplied again by the peace of mind of having certified professionals performing these tasks correctly, and you quickly see that it is considerably less expensive to hire an accountant!
Things to Consider
If you need help analyzing and understanding your financials, planning growth strategies for your business, or getting the most efficiency from some areas of your business, it is time to consider some assistance. Contact firms such as CustomOne CFO & Controllers to discuss your full-time or part-time needs.