Generally speaking, accounting is the language of all businesses. Sometimes, people have mistakenly believed that accounting is all about mathematical – this is a mistake!
Yes, accounting does really involve numbers, and sometimes you need those numbers to be located in the equation. But actually, that is not the main core of accounting.
Accounting revolves around one primary concept – that is, business decisions.
Accounting is a process of recording all the business financial records and transactions to make a wiser and profitable decision for the companies. And as a business owner, you are responsible for making decisions day in and out. Any choices you take, there are some considerations, especially finances.
For example, “would this decision can add value to my business?”, “can I afford this decision financially?”
These are just a few questions that you might probably ask yourself through your business decision-making process. Hence, the answers to these questions are found in your business’ accounting.
Accounting 101: Small Business Accounting
If you want a higher profitable business, you will need to create a solid accounting system from the start. You may consider the following when you create an accounting process:
- How will you manage your expenses and income?
- How will you receive the revenues for your products and services
- How often will you look at your accounting book?
- Who will be accountable for the accounting duties?
A quality back office accounting firm is experts in helping and assisting small business owners in setting up and manage their accounting systems in the best way that will suit their business needs.
This article will explain the essential steps and best processes for setting up and managing your business’ accounting.
Opening a Business Bank Account
Your personal and business accounts should be separated from one another. Depending on your company type, there are grounds needed for termination by IRS standards and policies. It would be highly inefficient to cycle through your business’ annual expenses and separates them as personal and business. An outsourced CPA can complete this kind of process.
If none of these can reason can shake you, then your business’ cash flow will suffer. Having a separate bank account for your business and personal matters can help you to monitor your cash flow more effectively.
There wouldn’t be any misunderstanding and hindrances regarding with your cash on hand. You can assure that the balance present in your online banking account is 100% related to your business only. Also, it can make it easier for the bookkeeper to manage and monitor your financial status.
Establish a Bookkeeping System
Bookkeeping is a must in every business, whether it’s a small sole proprietorship, partnership, or a corporation. You are required to complete these tasks at least monthly to identify your business’s financial performance. Generally, bookkeeping involves the following:
- Business transactions
- Reconciliation of business transaction to bank records and statements
- Classification of business transactions
Before, these kinds of responsibilities can be done manually. Thanks to technology, with the help of modern approach and methodologies using cloud software, online banking, and applications, bookkeeping duties don’t have to be time-consuming.
The amount of time needed to finish bookkeeping duties varies depending on the volume of bank accounts and financial transactions. Each of these transactions is required to be classified, and each bank account should be reconciled.