Starting a business comes with numerous responsibilities such as managing independent contractors, bookkeeping, working with clients, supervising and hiring workers, payroll tasks, and developing the business. Without the basic accounting concepts, all these may seem unachievable. However, through the help of the following accounting knowledge, small business owners can manage to juggle all these responsibilities.
Table of Contents
1. Creating a Bank Account
The creation of a bank account should be a priority for every entrepreneur after establishing a new venture. Bank records keep track of all their business expenses in terms of income, loss, and profits. A business account comes in handy during the taxation period since their income can be separated from the business income. It also protects a business owner from unfortunate problems concerning audits, bankruptcy, and lawsuits.
Before opening this account, however, it is advisable to research to figure out which bank offers the best small business accounting services that will favor the business. Mostly the charges of a bank business account are more than a personal one; after comparing the fee structures being offered, they are in a better position of choosing the bank to settle with.
The progress of a business can only be measured through accurate tracking of the business expenses. Through bookkeeping, small business owners can monitor the growth, prepare tax returns, track deductible expenses, legitimize the business’s filings, and build financial statements. It also provides the ability to organize business receipts alongside significant records.
Small business owners enjoy a variety of effective bookkeeping systems. They can hire an accountant or bookkeeper, use an outsourced bookkeeper within their locality, or be cloud-based. They can also do it themselves with the help of software such as Excel spreadsheet, Wave, or QuickBooks. The named software automatically process numbers, execute data entry, record overall performance and generate business reports. They provide calculations that are accurate if the correct data is keyed in.
3. Institute a Payroll Scheme
For small businesses to grow, their founders need to consider hiring workers to help run the business. This calls for the establishment of a payroll schedule that complies with the taxation rules alongside federal and state laws. The available accounting software also provides business owners with payroll features. To ensure their business has an established payroll system, small business owners have to provide a couple of information. They have to acquire an Employer Identification Number (EIN), register with the Electronic Federal Tax Payment System (EFTPS), and clarify the salary status of their employees. Lastly, they need to define the payment methods and the pay period of their workers.
4. Decide On the Businesses’ Payment Method
For effective running, small business owners will have to decide the best form of payment. They are in a position to either accept cash, credit, or debit cards. It makes it easy for them to identify whether they will need a merchant account in situations where they receive international orders. Having a third-party payment processor will cost them some charges which vary from one merchant to the other. It is important to rule out this fact to be aware of the expenses they are willing to incur.
5. Seeking Financial Help
At one-point small businesses will need to apply for external financial funds to help expand their business. The aid may be applied through investors, business partnerships, or credits. To convince their investors on why they need funding, small businesses need to provide financial statements such as cash flow statements, balance sheets, and income statements. Moreover, entrepreneurs must calculate the Return on Investment (ROI) relating to the loan. To calculate the ROI, they need to accurately calculate the expenses covered by the loan and the interest and new revenue expected to generate from the loan. This prevents them from making bad business decisions.
The above-explained techniques will help in the smooth running of small businesses and contribute to their growth. Navigate the available business tools and pick the ones that work best for your business to guarantee good financial management.