Everything You Need To Know About Accounting

Everything You Need To Know About Accounting – Unless you want fines and IRS audits, you know you have to do it. Without it, you wouldn’t know the financial health of your business. Your business decisions will be shots in the dark. We are talking about accounting, of course.

So how does bookkeeping protect your business, measure its health and help you make decisions? In short… Why is accounting important in business? Let’s count the ways.

Everything You Need To Know About Accounting

Accounting and business go together like peanut butter and jelly. You can’t have one without the other. but why?

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Why is accounting important, you ask? Without bookkeeping, you wouldn’t know how much money your business made. You can easily forget how much money you paid. And, you won’t remember how your current profit or loss compares to previous quarters.

You can’t skip bookkeeping…but you can make it easier. With Patriot’s online accounting software, you can import bank transactions into your ledger, send estimates, reconcile your bank statements and much more. Start your free trial today!

Which customers haven’t paid you? Wait, what debts haven’t you paid yet? If you use accrual accounting, you (should) know exactly how much is owed and payable.

In short, bookkeeping shows you exactly what your business has done when it comes to finances. This keeps you organized so you can accurately and legally fill out your tax return, which we’ll talk about later…

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Many business owners dread filing small business taxes, especially if they have no idea where to start. This is where the importance of business accounting comes into play.

The first step in filing your tax return is gathering financial records. Without these records (eg, financial statements), you won’t be able to enter the correct numbers on your return.

But because we touched on it above, we’re going to dive into the second part of accounting and filing tax returns: the dreaded audit. If you are audited by the IRS, what will happen? You need to show them that you have done your due diligence and have the necessary accounting information to collect your refund.

If you have shareholders in your small business, you know how important it is to show and not tell. Accounting does just that.

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Your shareholders hold you accountable for the success of your business. They can see the growth and success of your business by looking at your accounting records.

On another note, bookkeeping can also help you hold your employees accountable. Stay on top of things like reconciling bank statements and running trial balances. This way you can catch fraudulent activity before it costs your business too much.

Is it worth buying the new and leading printer for the office? Well, it depends if you can afford it.

OK, what about your expenses? Is there something you need to cut to help your business’s bottom line? It depends on how much you spend and on what.

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To answer such questions, you need to look at the data—your accounting records, to be exact. Bookkeeping can help guide the decisions you make to avoid common business mistakes, such as:

Before you make a change to your business, you should probably do a small business risk analysis. This way you can determine whether taking this risk could benefit or harm your business.

But what about after the risk? Don’t you want to analyze the effects of taking a risk (ie, making a change) after you’ve done it?

Bookkeeping can help. You have the numbers that show the expenses and income of your business before the change. And after you make the change, you can compare the numbers. This is how you know if your strategy has helped or hurt your business.

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Investors and lenders need to learn a little about you before they invest or lend you money. And that means poking and poking through your business’s accounting books.

Generally, you must present your business’s financial statements to investors and lenders. That way they can get information about your profitability.

Without proper accounting books, your financial statements, financial projections and profitability claims will not be accurate or have any backing.

Taking care of bookkeeping for your business is not a choice. Although you can choose how you want to do this (eg, outsourcing, using software, etc.), your business must have an accounting system in place.

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The IRS requires you to choose a business structure and accounting method. Without it, your small business tax return will be inaccurate. And you know what that means… the IRS audits for red flags and penalties.

In addition to keeping detailed records, you may need to follow a defined book of accounting rules, known as generally accepted accounting principles (GAAP).

Do you recognize the importance of accurate bookkeeping? If so, you can take the following steps to keep your business fit:

As any small business owner would tell you, business success does not come from laziness. So, avoid being lazy when it comes to your accounting books. Happy accounting, entrepreneurs!

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Check out our free guide, Setting Up Your Bookkeeping for the First Time, to help take the stress out of your bookkeeping.

Get started with a free payroll setup, and enjoy free expert support. Try our payroll software with a free, no-obligation 30-day trial. Accounting may not be the most interesting subject when you start a business. It brings to mind complex spreadsheets and hours of clearing receipts. But your business depends on good bookkeeping. You started a company to make money – or at least run a sustainable enterprise – and you will never be able to achieve this without tools such as a balance sheet, tax documents and a budget or forecast.

For many entrepreneurs, accounting can seem intimidating. You probably started with a great idea for a product or service, not the day-to-day demands of running a business, like bookkeeping. To help you overcome this hurdle, we caught up with Ashley Christenson, tax manager at Tanner LLC, a local public accounting firm, to get some insights on getting started with bookkeeping for your business. Here are seven things she said you must know.

The most basic place to start is to simply know the definition of accounting. Christenson shared this definition from Investopedia: “Accounting is the process of recording financial transactions relating to a business. The accounting process includes summarizing, analyzing and reporting these transactions to oversight agencies, regulators and tax collection bodies.”

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More simply, accounting is the recording of all financial information for your company, Christenson said. Without bookkeeping, you won’t be able to track your business, you won’t know if it’s doing well or not, and you’ll likely have problems with taxes. You will also find it difficult to get bank and investor loans, as they often require detailed financial information.

If you’ve started a business, you’ll likely want to make money, and it’s very important to have a system for recording your income and expenses, Christenson said. The first decision you need to make is how you want to record these things. You can choose between an Excel document, a Google Sheet, Quickbooks or another tool, depending on the complexity of your business transactions. You also have to choose if you want to do it yourself, outsource the work, or if you want to hire someone else.

You’ll want to start keeping records immediately after starting a business. Don’t wait, because you’ll regret it when you eventually need those records, and you’re forced to find records and information that are no longer easy to come by, Christenson said. So you might consider hiring an accountant to manage all of your accounting needs or maybe just take a look at your records from time to time to see if anything is amiss. “We all make mistakes, we’re human,” Christensen said. Her office has four levels of review of tax documents before they are sent to the IRS, to make sure everything has been considered and seen by multiple people.

When keeping records, be sure to keep your original receipts. Yes, you will most likely need them. If you get audited by the IRS, they will want to see receipts, not your Excel file. Christenson advised businesses to keep their receipts until the statute of limitations expires on your tax return, so it’s probably safe to throw them away for tax purposes.

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A balance sheet is a statement of your business’s assets, liabilities and capital. You will need one. Accountants use this standard formula to create a balance sheet:

. Assets are anything your company has that has value, such as cash, product inventory, computers, and so on, Christenson said. Liabilities are things your company owes, such as a loan or credit card debt. Equity is the rights the owner has over the company’s assets, or otherwise, it is actually the owner’s investment in the company and the company’s accumulated profits.

You may not use the balance sheet much at first, but eventually it will become very important as banks and investors often require it when reviewing your business. You may also find them helpful as they provide a snapshot of your business at any point in time. “It will give you a good sense of where your business is as a whole,” Christenson said.

If you have

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