Accounting For Small Businesses 101: How to do Accounting for a Small Business?

Accounting for a small business may sound simple but it's really not, right? Knowing your business expenses, revenues, profits, or losses accurately at your fingertips takes a lot of time, effort, and resources. Moreover, according to the "Small Business Report—Accounting," 60% of small business owners feel ill-educated about accounting.

Therefore, we have shared a complete guide on how to do accounting for a small business efficiently without hiring an accountant.

How to do Accounting for Small Businesses

Accounting for small businesses is complex work to do as most of the business owners have to do it themselves while managing all the other business tasks, such as marketing, sales, customer relation, and other essential business work.

So, let's start with the guide on accounting for small businesses that helps you save time and money.

Benefits of a Separate Business Bank Account

Having kept personal and business accounts distinct provides multiple advantages:

Types of Business Expenses to Track

A business has many types of expenses to keep track of. Understanding these categories helps you maintain accurate financial records:

Business operating expense

Businesses have to make many expenses just to run the office. Common expenses are electricity bills, water bills, property rent, and office supplies. Tracking these expenses lets you know the business's minimum monthly requirement of funds.

Taxes

Keeping a record of taxes paid previously allows your business to plan for the taxes next time. Moreover, it helps claim tax returns. And whenever you apply for any sort of loan, the bank needs your tax filing records, without which the loan would not be sectioned.

Recreations

Who does not like to enjoy the day? And you should, but don't forget to record the expense. Tracking the expenses for recreations lets you hold your horses. It is easy to get carried away with a celebration every day if you don't keep track. And recreational accounting expenses help you manage the funds wisely.

Out of town travel

As a small business owner, you might need to travel out of town for business purposes. So, should you account for the travel expenses in your ledger or business ledger? Yes! You are right. Business travel expenses should be accounted for in business expenses.

Travel expenses include:

• Flight tickets
• Cabs
• Accommodation
• Meals

Gifts and vouchers

Gifting your clients is a gesture that helps build business-customer relations. Thus, these gifts should be recorded so that you don't go over the budget. Similarly, you need to keep track of the vouchers you give your employees as well. Moreover, knowing how to check and approve an invoice helps your business limit unnecessary expenses.

Stay Synchronized with Invoice Status

Thus, you can use the InvoiceOwl app. This invoicing app not just lets you create and send invoices and collect the accounts receivable but provides you with real-time notifications for the invoice status. With the InvoiceOwl app, you get notifications when a customer receives, opens, and pays the invoice. Tracking invoices never lets you misplace an invoice or forget to follow up on an unpaid invoice.

Why Choose the Right Accounting Software

Pick the accounting tool according to your cash flow, accounting cycle, and scale. We would suggest you choose an accounting tool that offers a double-entry accounting system.

A small business faces different challenges every day. And to conquer different challenges you need to adapt your methods and approaches. This keeps your accounting efficient and protects you from any accounting failure. Okay! So, now you know it's not rocket science. Any accountant can easily do it with the right accounting software.

We hope you are ready to do the accounting yourself. Moreover, we have answered some of the most common questions of readers.

Be Accountable with your Small Business Accounting

Accounting for small businesses is necessary as most small-scale businesses are running on a tight budget. Therefore, picking the right bookkeeping system is the key to success. Without knowing your numbers, you can not expect your business to grow. Thus, we provided the steps to do accounting for a small business. If you want a smooth accounting process for your business, do not skip any of the following steps.

• Open a Separate Business Bank Account
• Track your Expenses
• Be in Sync With Invoice Status
• Pay Attention to Taxing
• Invest in Right Accounting Software
• Re-evaluate your Accounting System

Another accounting essential for any business is invoicing. If the invoices are what is stopping you from creating the best accounting system, download the InvoiceOwl app. It helps you with invoices and creates annual sales reports by clients, dates, and items. If you found this blog interesting, visit the InvoiceOwl blog section regularly for similar interesting discussions about accounting and invoicing.