How to Do Accounting for Small Business: Basics of Accounting

The difference between how much you sell a product for and how much the business actually takes home at the end of the day is what truly determines your ability to keep the doors open. Selling to international customers can be easier than domestic sales. Canadian store owners don’t need to charge GST/HST to customers who are outside of Canada. Skip lengthy third-party activations and go from setup to selling in one click.

Using Accounting Software

The best bookkeeping software syncs with your business bank account and payroll systems so that you’re easily able to import and export transaction history. We’ll cover some of the best business bookkeeping software options a little later. Enterprise resource planning (ERP) software includes all the features of accounting software, plus additional features such as CRM, inventory management and project management. ERP software is typically used by larger businesses while accounting software is more suited for small businesses. If you operate a chain restaurant, for example, choose an accounting software that you can integrate with your in-store point-of-sale (POS) system.

Also, keep a close eye on outstanding customer payments (a.k.a. accounts receivable). Slow-paying customers can impact your ability to pay your own bills, and the earlier you can identify problems in collecting payments, the sooner you can resolve them. Consider sending a reminder the day before an invoice is due or the moment it becomes past due. Learn how to build, read, and use financial statements for your business so you can make more informed decisions. There are three financial statements that all small businesses should consider creating. If you select one accounting method and then decide that you’d like to change it after filing your taxes, you’d need to complete IRS Form 3115 to formally do so.

These applications automatically crunch numbers, perform data entry, track performance metrics, and produce business reports. After correctly entering your data, the software guarantees accurate calculations, which provides added comfort in tax season. Effectively managing your small liquidation law business’s finances goes beyond bookkeeping.

Small business accounting FAQ

Here are some basic steps to get you started keeping track of your small business’s financial information, generating financial statements, and filing taxes. This ensures that you have the correct amounts when you’re ready to deduct business expenses on your annual tax return. Intuitively, at the top of this screen was a link that gave me the option to add a custom widget (or “Insight”). Once I saved the new widget, it was automatically added to the dashboard.

1. These options were also always available to me wherever I was in the platform via a slide-out left-hand menu.
2. Within each form, I was also given the opportunity to attach documents as necessary, such as receipts, contracts or quotes.
3. Business accounting is typically for smaller businesses rather than large corporations.

Set Up a Chart of Accounts

However, working with a CPA offers many benefits for LLCs and corporations. CPAs can analyze bookkeeping records, help with payroll and taxes, offer financial consulting, and represent you during IRS audits. Tech-savvy business owners or those familiar with accounting principles typically use accounting software.

Best Practices for Small Business Accounting

If you’re self-employed (sole proprietorship, LLC, partnership), you’ll claim business income on your personal tax return. Corporations, on the other hand, are separate tax entities and are taxed independently from owners. When a customer walks into a brick-and-mortar retail store, they pay the sales tax of whatever state or province they make the purchase in, no matter if they live there or visiting from somewhere else. However, when you sell online, customers may be located in different cities, states, provinces, and even countries. Depending on your business model, you may be planning to purchase and import goods from other countries to sell in your store. When importing products, you’ll likely be subject to taxes and duties, which is worth noting if you run a dropshipping business.

Notably, OneUp is replete with features such as dashboards, invoicing, CRM and more, offering businesses an expansive toolkit to navigate their financial landscape. The platform’s commitment to consistency across devices ensures that as businesses grow, their accounting access remains unhindered, whether they’re at the office desk or on the move. The software also offers tools for businesses requiring financial compliance such as GAAP, ASC 606 and SOX. These insights include profitability ratios, cash positions, liabilities, fixed assets and taxes. NetSuite’s pricing is custom, so you’ll need to speak with a sales team member for a quote. AccountEdge provides a meticulously crafted suite tailored to small businesses.

At its core, bookkeeping is about recording financial data, while accounting is about interpreting financial data. Income statements, often referred to as profit and loss statements, summarize a small business’s revenues and expenses over a specific period. Assets have economic value and can reduce expenses and improve sales. Examples of assets include real estate, inventory, cash, and accounts receivable. Balance sheets list assets in order of liquidity — how easily they can be sold, consumed, or turned into cash.