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What Small Businesses Miss When They do Their own Accounting

As a small business owner you probably thrive in a DIY environment, but the more hats you wear the less you’ll accomplish successfully. Accounting is one of the most important areas for keeping your company profitable, as you start out and your company grows software can only take you so far, accountants can help your company move forward. An accountant is an invaluable asset that helps not only with balancing books and tax returns but with long-term tax planning, business planning, marketing and other aspects vital to your business’s financial health.

Why Your Small Business Need an Accountant

  • There are inevitably questions that come up during the year and you need to have a relationship with someone who knows your business and can offer advice when you have questions your business is in the startup phase there are many things to think about when you’re just starting out like business structure, business plan, bank accounts, government regulations location and financing you might think it is too early to hire an accountant but the way you set up your operations can have a serious impact on your future success. Check here!
  • An accountant can help you determine the most appropriate business structure, analyze your business plan for financial compatibility, and assist you with making sound financial decisions throughout the startup process so you don’t have to spend more money to correct mistakes later.
  • Your business has employees in the first few years of operation you may not feel you have enough work for an accountant, the truth though is that an accountant will have the specialized knowledge to make your money work for you even though you don’t have a huge workforce the accountant can help ensure employees and independent contractors are classified correctly.
  • Oversee payroll and payment processes and create appropriate timelines for sending W2s and 1099s your lender requests a financial statement the Small Business Administration reports that small businesses borrowed over 6 billion dollars last year at some point your business will probably need additional funding whether it’s for expansion, new equipment, purchasing property or even establishing an emergency fund, before you approach a lender having an accountant prepare a financial statement can increase your chances of approval.
  • Your budget is falling short; according to the Bureau of Labor Statistics about half of all businesses will fail within five years of opening although there are many factors related to failure not meeting budget goals can decrease the chances of your business survival having an accountant on-hand to analyze your budget assists in making changes and catch errors will help you make sure your budget is on target.

For success questions to ask yourself before hiring an accountant; does your business planning match your financial forecast, have you read the tax code, do you have enough time to take care of all the accounting duties yourself, are you sure your employees are classified correctly, do you know what needs to be in a financial statement, and is your budget working for you. If you answered no to any of these questions you can benefit from hiring an accountant. For more details read our article:

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Do You Know the Difference between Bookkeeping and Accounting?

Accounting and bookkeeping are considered very similar sets of services. Bookkeeping is considered a subset of accounting services in business terms. A designated person for the accountant position must be familiar with bookkeeping services. But a bookkeeper does not need to know all the tasks performed by an accountant.

A company based on its size should choose between two types of services to follow a proficient approach to problems related to finances. The following discussion differentiates between bookkeeping and accounting services to help you choose the best professionals for each of them:

Defining the Two Processes

Accounting, also known as financial accounting, is the set of services used to carry out a complex analysis of an organization’s overall financial situation that involves bookkeeping as a small part of it.

Bookkeeping is defined as the set of services that keep accurate records of business transactions so that higher-level management can monitor the inflow and outflow of money. More details!

An Elaborate Vision of Duties

You can learn more about the differences between the two by understanding the tasks performed by an accountant and a bookkeeper. The duties of a bookkeeper focus more on the day-to-day financial situations of business. This involves:

–           Reconciliation of company bank transactions to know or avoid any type of fraud that occurs in the company bank account.

–           Manage the payroll of employees taking into account the government regulations of the region.

–           Maintain records of accounts receivable and accounts payable.

–           Track inventory affected by purchases made and income generated by a company.

–           A bookkeeper must make sure that all business accounts are accurate and up-to-date.

An accountant generally does not do his duties day by day. The following widely classified duties are part of an accountant:

–           An accountant performs the analysis of the financial records and reports prepared by the bookkeeper to help senior management create new decisions for the development and earnings of the business.

–           Taxable income calculation and deductions are the essential tasks for which a business depends on an accountant.

–           Budgeting is another vital activity for which a business house wants the services of an accountant.

–           An accountant works as an advisor to the business during events such as mergers, acquisitions, and all other new company decisions.

What Services Are Necessary?

Small businesses do not make a large volume of bills and invoices and therefore can work well with either kind of service. In fact, an accountant is the most suitable alternative for a small business, since they can perform both kinds of tasks. Hiring a small business bookkeeper may not be of much help in the process such as tax preparation and important decision making.

When it comes to large companies, there is a need for both types of services. It becomes more significant in a large company to decrease the burden on an accountant in order that you can focus more on essential tasks such as financial statement analysis and business advice. Therefore, a bookkeeper should be hired to handle daily procedures such as employee payroll administration and account management.

In several states, a clear distinction is made between the duties of an accountant and a bookkeeper to help companies of various sizes select the right set of services. These states recommend hiring the best services of a Certified Public Accountant (CPA) for accounting purposes. Companies also receive guidelines for learning about the duties of these professionals. For business accounting service, always choosing a certified professional is a good step in the direction of maintaining and establishing the financial stability of the company. Click here for more information:

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