How to Do the Accounting for a Small Business

How to Do the Accounting for a Small Business

With 80% of small businesses that launch seeing success after being in business for one year, many people decide to become an entrepreneur and bring one of their business ideas to life. However, as a small business owner, there are many hats and jobs you have to juggle. 

One such day-to-task you’ll have to master is accounting. It can be overwhelming to figure out how to do the accounting for a small business if you’ve never had to before. Keeping your finances in order is essential to the success of your business. 

This guide will go over everything you Business finance NZ to know about small business accounting. 

Know Accounting Lingo and Terminology 

One of the things you should know right away is the various bookkeeping and account terminology. This will make it a lot easier to navigate trying to learn accounting when you have a basic grasp of the lingo. You can also get efficient accounting & tax services from here.

Some common terms you should know include:

  • Sale: When you receive cash for a transaction
  • Expense: An item or service you pay for 
  • Asset: Something your business owns, like a computer
  • Liability: An item you’re paying money on, like a loan
  • Revenue: The total income you make on a sale
  • Accounts Receivable: The total amount a customer owes you when they receive an invoice

Now that you know some key terms, it’s time to get moving on getting your small business accounting figured out. 

Important Financial Documents 

There are a few documents you need to help you answer critical financial questions about your business. They’ll help you make smart decisions in the future and make your business plan. 

Profit and Loss Statement

This document shows if your business is profitable with income and expense tracking. It’s a summary of your total revenue minus business expenses for a certain period of time. It typically shows a certain period of time, like a quarter of the year. 

Balance Sheet 

This document shows your liabilities, equity, and assets for your business. It shows you what you owe and what you currently own. A balance sheet gives you a snapshot look at what your business is worth. 

Cash Flow Statement 

A cash flow statement shows you where exactly your cash is going. You’ll be able to see how much your business makes each day and if the assets you bought are paying off. 

Additionally, it’ll show you how much money is going toward things you financed. Operating your business debt-free is the ideal way to go. You’ll be able to evaluate exactly how much is going toward your debt. 

Invest in Accounting Software

There is a variety of accounting and bookkeeping software available for you to check out. While you can take the time to learn as much as you can about accounting for small businesses, it’s handy to have everything you need in one central location. 

An example of thorough accounting software is https://practicepro365.com/accounting/. You’re able to manage your business finances and employees in one spot. 

Become an Expert at How to Do the Accounting for a Small Business

Before you get started on learning how to do the accounting for a small business, make sure you have a business bank account opened up. You want to keep personal and business finances separate. Don’t let a lack of accounting knowledge stop you from perusing your business dreams. 

For more information on running your own business, check out one of our other articles.

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Christophe Rude

Christophe Rude

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