Why is accounting important for a small business?

Having an effective and current accounting system in place is probably the biggest factor in whether a business is successful or if it fails.  Knowing the numbers is absolutely critical in making so many business decisions from pricing products and services to determining effective marketing strategies.  Keeping good books is also essential to meet your tax and legal obligations. This may be terrifying for some of us but it does n0t need to be.  In many cases for individuals everything you need could easily be done in a paper ledger or a spreadsheet with a shoebox for receipts.  For many online businesses, the sales and cost of goods are tracked by the software you are using,  however, to take advantage of other tax-deductible expenses you will want to track those as well.  In most situations, businesses will use accounting software. 

Accounting for small business

How do I use a paper-based ledger for accounting?

To do accounting on a paper-based ledger, you will need to follow these steps:

  • Set up your ledger by dividing it into columns. You will need columns for the date, a description of the transaction, the amount of the transaction, and the running balance.
  • Record all of your financial transactions in the ledger. For each transaction, enter the date, description, and amount in the appropriate columns.
  • Calculate the running balance. To do this, add the amount of the transaction to the previous balance to get the new balance.
  • Repeat this process for every financial transaction.
  • Periodically reconcile your ledger with your bank statement to make sure that all transactions have been recorded and that the balances match.

It is important to keep your ledger organized and up-to-date, as it is the basis for creating financial statements and making informed business decisions. If you need help setting up or maintaining a paper-based ledger, you may want to consider consulting an accountant or financial advisor.


How do I Choose Accounting Software?

There are many factors to consider when choosing accounting software. Here are some things you may want to think about:

  1. Cost: How much can you afford to spend on accounting software?
  2. Features: What features do you need in your accounting software? Do you need something basic or do you need more advanced features like inventory management and project tracking?
  3. Ease of use: How easy is the software to use? Is it user-friendly, or will you need to spend a lot of time learning how to use it?
  4. Compatibility: Is the software compatible with your business’s other systems, such as your point-of-sale system or your CRM?
  5. Integration: Does the software integrate with other tools you use, such as your bank, your invoicing software, or your payroll service?
  6. Scalability: Will the software be able to grow with your business?
  7. Customer support: What kind of customer support is offered by the software company?

It can be helpful to do some research and compare different accounting software options to find the one that best fits your business’s needs and budget.

In most cases, one of the options from Quickbooks is the best solution.  There are other great programs available, but having something that integrates so well with banks, other software, and accounts software are extremely helpful.  It has many great features that allow you to track receipts, mileage, track time, and much more.

What information needs to be tracked in accounting?

A business needs to track a variety of financial information in order to make informed business decisions and prepare financial statements. Here are some things that a business might need to track in accounting:

  1. Revenues: This includes all of the money that a business receives from the sale of goods or services.
  2. Expenses: This includes all of the money that a business spends to operate, including things like rent, utilities, salaries, and supplies.
  3. Assets: These include things that a business owns that have monetary value, such as cash, inventory, equipment, and property.
  4. Liabilities: This includes debts and other obligations that a business owes to others, such as loans and accounts payable.
  5. Equity: This represents the ownership interest in a business and includes things like the value of the owner’s investment and retained earnings.
  6. Taxes: A business needs to track its tax obligations and payments to ensure that it is in compliance with tax laws.

By tracking this financial information, a business can make informed decisions about how to allocate resources, set prices, and plan for the future. For a simple business with little complexity, accounting is a simple process.  As complexity increases the software you use will make the complex operations pretty simple.  Keeping good books is a must for any successful business, fortunately, with today’s resources, it’s easy and affordable.