Some entrepreneurs dread small business accounting, but they should praise their bookkeepers instead of complaining about the process. Small business accounting goes beyond tracking transactions and preparing taxes. Quality financial and managerial accounting help you make the right decisions, expand your business, and offer valuable insights to increase profitability. If you want to earn more in your business, follow along with this guide for three key goals of your small business accounting process.
One of the core reasons most businesses start with small business accounting is the requirement to file quarterly or annual taxes. This is a benefit of small business accounting you should not overlook! Taxes are required by law, and incomplete or inaccurate taxes can lead to audits, penalties, interest, and other tax problems most business owners would rather avoid.
Yes, one aspect of business accounting is looking for opportunities to add deductions and lower your overall tax bill. But at the end of the day, your taxes need to be accurate and complete. If you have good accounting year-round, tax prep is a piece of cake! All you have to do is print off your profit and loss statement and balance sheet and fill in a few forms. If you don’t have proper small business accounting throughout the year, you will run into expensive and time-consuming tax preparation every April.
Outside of tax season, your accounting records give you the most important reports to help you understand your revenue. Many entrepreneurs are distracted by what they want to work in their business rather than focus on what is actually working. To know what is actually working, you need detailed accounting records.
Just as you need to know where your money is coming from, you need to know where it is going. You might be surprised when you break down things like payment fees, employee costs, and other operating expenses. If you don’t know where your money is going, you won’t know how to optimize and cut costs. Keeping costs under control is critical in any small business.