Small Business Accounting 101 - Do you understand the terminology and processes involved in maintaining your businesses financial statements?
As a small business owner, it’s important to understand how accounting activities tie into your everyday operations.
Keeping track of your profits and expenses will indicate how well your business is doing and what you need to do to improve.
Even if you are able to hire a bookkeeper or accountant to handle your finances, it’s good to have the basics of small business accounting down to oversee what is being done.
The balance sheet (B/S) shows all the liabilities, assets and net worth of the company that provides a snapshot of what is owed and what is owned.
If you have investors or are
seeking a loan, you most likely will need to produce a balance sheet to show
them why you and your company are worth their investment.
Learn how to set up a chart of accounts in QuickBooks. QuickBooks accounting software is one of the most user friendly, forgiving accounting software programs available.
It is especially so when setting up the accounting chart of accounts. QuickBooks makes it easy.
Long-term liability is a claim on the assets of a business and it has a major impact on the financial health of an organization over time.
This is especially true if the long-term liability for a company is poorly recorded and poorly managed.
Here we will show you how important these debts are for determining and preserving financial stability.
This is also known as an income statement, and shows what your company has brought in and paid out. It also displays what your income has been over a certain period of time.
With the profit and loss statement, you will know whether or not your company is making or losing money - an important part of understanding accounting and bookkeeping principles.
You can determine which processes, services or products you need to enhance, and which ones you need to get rid of.
Assets are what you own or what is owed to
you. This includes equipment, buildings, furniture and outstanding invoices
Liabilities are what you owe and other debts.
This includes invoices you need to pay (accounts payable), payroll and taxes.
This is your assets minus your liabilities and is also known as your company’s equity.
These financial activities are crucial elements of any small business and should be prepared on a monthly or somewhat regular basis via professional bookkeeping services, the accountant or business owner and reviewed to see where the company stands.
You may want to obtain a financial accounting program that can generate these documents for you at a moment’s notice.
A financial accounting program can also help you design and prepare invoices, estimates and will keep all your financial records and information in one consolidated place for better recordkeeping.
The principles of small business accounting are not hard – it just requires due diligence and good reporting procedures.
Once you get over the initial hurdle and learning curve, keeping up with these accounting and bookkeeping basics will be a breeze!
If needed, there are classes available
that teach business accounting 101, or you can have your outsourced bookkeeping services or your
accountant show you the basics. The financial health of your company
depends on it.