Keeping track of income and expenses is essential, even if you don't own a business. And if you do own a business, things get even more complicated. There are paychecks to issue, taxes to track, and subcontractors to pay out. All of these details are a whole lot less challenging when you hire an accountant to oversee them. However, it is still important to know a little bit about accounting yourself. Dig into the articles on this website, and you'll gain a better understanding of accounting principles, what services accountants really offer, and the benefits of hiring these professionals to assist with your finances.
As a small business owner, it is essential to understand accounting. Having a basic understanding of accounting will help you make smarter business decisions that will contribute to the overall success of your business.
1. Always Separate Personal and Business
One of the most classic mistakes small business owners make is mixing up their personal and business money. You should have bank accounts and credit cards that are just for your personal business and that are just for your small business. Keeping things separate will make it much easier to handle your business accounting and keep track of how your business is doing.
When it comes to paying yourself, give yourself a formal pay date, and keep track of what you pay yourself. Don't just randomly transfer money from your business to your personal account.
2. Remember Tax Deadlines
Second, you are going to want to remember tax deadlines. As a small business owner, you are going to need to meet tax deadlines. You need to meet quarterly tax deadlines and ensure that you are keeping up with your federal taxes. Falling behind on your federal income taxes can result in fines and penalties that will increase your tax burden. If you have employees, you will also have to pay the taxes related to your employees.
Not only do you need to remember tax deadlines, but you also need to budget for them as well. You are going to want to ensure you are saving money for those deadlines as well.
3. Embrace Profit and Loss Statements
Third, you are going to want to embrace profit and loss statements. Profit and loss statements will allow you to see your business expenses, costs, and revenue. This will allow you to see how your business is doing and will allow you to make smart choices about your business going forward. This will allow you to see and understand your cash flow, better understand how your business is doing, and track trends regarding your expenses, costs, and revenue throughout the year.
4. Track All Expenses
It is not enough to have a statement on your credit or debit card that shows that you spent money somewhere. You need the actual receipt that shows exactly what you bought. You can use an app to easily store all of these receipts, as you will need them when tax time rolls around.
You don't have to master business accounting to run your small business. You can hire an accountant to work on your accounting. It is helpful to understand some basic accounting principles, such as separating business and personal expenses, learning about tax deadlines, and tracking all expenses via receipts.