Everyone likes to be independent. And one step towards independence is starting a small business.<\/p>\n
If you just launched one, congratulations. One vital factor for business success is accounting. It helps you monitor the business\u2019s progress and enables you to plan. But you need good accounting with sound financial strategy and efficient record-keeping.<\/p>\n
Read on to learn more about how to do accounting for small businesses and why you may need an accountant.<\/p>\n
Small business accounting is all about keeping accurate and organized records of your business’s financial transactions\u2014assets, liabilities, sales, and expenses.<\/p>\n
Bookkeeping for small business in Canada deals primarily with three accounting reports:<\/p>\n
Here are steps on how to do your own accounting for a small business.<\/p>\n
A business account is necessary because that\u2019s where you will channel your income.<\/p>\n
First, you must register your business legally to get a name by which to open your account. And for tax purposes, it\u2019s recommended that the business account be separate from the personal one.<\/p>\n
A business bank account also protects personal assets should your business fall into bankruptcy or face audits or lawsuits. Obtaining funding from investors and creditors is also easier if you have a good business financial track record.<\/p>\n
In most cases, all you need to open a bank account is your business name and registration with your province. However, every bank has its list of documents you need to provide when opening one.<\/p>\n
The best way to monitor the progress of your small business is through accurate and effective tracking of expenses. In fact, it forms the basis for solid bookkeeping and is essential in tracking deductible expenses, preparing tax documents, and legitimizing your filings.<\/p>\n
Note that CRA requires you to keep receipts of all your business expenses. As you track your business expenses, five of the most important receipts to pay attention to are:<\/p>\n
A bookkeeping system helps you undertake the daily accounting activities that revolve around recording transactions, categorizing these transactions, and reconciling your bank statements.<\/p>\n
As you can see, the difference between bookkeeping and accounting<\/a> is that you require the bookkeeping to do accounting.<\/p>\n You might be wondering, \u201cHow do I do simple bookkeeping for my small business?\u201d Well, how you approach bookkeeping is up to you. Some of the options available include:<\/p>\n You can use the cash accounting method that recognizes revenues and expenses when you receive or pay them.<\/p>\n Alternatively, you can use the accrual accounting method, where you recognize revenues and expenses only upon transacting. This method requires tracking all payables and receivables.<\/p>\n If you\u2019re a Canadian business owner, it’s compulsory to use the accrual method.<\/p>\n Now you know how to do bookkeeping<\/a>. You\u2019ve got the three financial accounts you need for your small business and a bookkeeping system. Therefore, you can start recording all your transactions.<\/p>\n Just ensure you record the transactions correctly for the balances to match, allowing you to close your books.<\/p>\n For journal entries, you don’t indicate specific details about the biller, item, or vendor. All you should do is track credits and debits by each account.<\/p>\n Today, businesses use accounting software to balance books. Automating your accounting also saves you the time you would otherwise spend on Excel spreadsheets.<\/p>\n Some of the most common software include:<\/p>\n Integrating all your financial tools\u2014credit cards, time tracking apps, banking services, and receipt apps in your accounting software helps you get the best out of accounting software. That\u2019s because the software can easily find an activity and categorize it. Additionally, accounting software automatically does the following:<\/p>\n If you have several employers, you need a payroll system to go about the salaries.<\/p>\n Ensure the employee payroll system you adopt is Real Time Information (RTI)-compliant to avoid finding yourself on the wrong side of the CRA.<\/p>\n At the end of your bookkeeping, you must balance your books before closing them, often quarterly for most businesses. At this time, your account credits and debits should match (the totals down there). It\u2019s what a balanced book entails.<\/p>\n You have to record all the journal entries you\u2019ve been crediting and debiting in the general ledger and then adjust your account balances appropriately, after which the following accounting equation applies:<\/p>\n Assets = Liabilities + Equity<\/p>\n If this is not the case, it means there are some errors that you need to correct.<\/p>\n Financial reports are a summary of the flow of money in your business. They show how your business is doing, enabling you to plan the way forward.<\/p>\n Bookkeeping software has made it easier to generate these reports, and you can get them anytime, especially when you need to make quick financial decisions.<\/p>\n Accurate and organized record-keeping ensures all your financial transactions are secure. Anytime you want to access something, you can easily find it.<\/p>\n In addition, secure record-keeping ensures you adhere to the law, something small businesses must do to remain legally compliant.<\/p>\n Granted, you can learn accounting<\/a> and do the bookkeeping yourself. However, it\u2019s recommended that small business owners hire a certified public accountant<\/a>.<\/p>\n It saves you a lot of money and performs various tasks, including:<\/p>\n Now you have the answer to the question, \u201cHow do small businesses keep financial records?\u201d And if you follow the steps mentioned above, you\u2019re bound to succeed. Remember, finances mean everything for a business, and managing the same starts with good accounting. Start with the right bank account and follow every step. Your business will flourish and keep growing.<\/p>\n","protected":false},"excerpt":{"rendered":" Everyone likes to be independent. And one step towards independence is starting a small business. If you just launched one, congratulations. One vital factor for business success is accounting. It helps you monitor the business\u2019s progress and enables you to plan. But you need good accounting with sound financial strategy and efficient record-keeping. Read on …<\/p>\n\n
4. Record Every Financial Transaction<\/h3>\n
5. Use Accounting Software and Other Tools<\/h3>\n
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6. Set Up a Payroll System<\/h3>\n
7. Balance the Books<\/h3>\n
8. Prepare Financial Reports<\/h3>\n
9. Store Records Securely<\/h3>\n
Do You Need an Accountant for a Small Business?<\/h2>\n
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Conclusion<\/h2>\n