Small businesses face unique accounting needs, and often small business owners would rather take care of these things themselves.
When it comes to accounting, it’s immediately evident when someone has changed their system or methods. Have set rules in place that will guide any new employee who handles expenses, income, or manages the books.
Rules such as:
Along with having rules, you should decide your accounting method and stick to it. Take some time to decide which accounting method is best for you, as you should be using it for many years to come.
Small business taxes are full of difficulties. That’s why CPAs continue to be in high-demand, no matter what shape the economy is in. If you did not pay out on your quarterly estimates or properly put aside a reserve for unexpected penalties taxes can end up closing your business.
Hiring a CPA, even if it’s just for your tax preparation and handling can ensure that taxes aren’t an overwhelming aspect of your business.
It is a common mistake that business owners run their business expenses, income, and personal expenses together. Doing this goes against the basic accounting principle that your business is an economic entity.
Always keep your personal finances separate, pay yourself a wage, and protect your business from any personal debts.
Have you ever expected a bill to come through and when it arrives it’s much less than you expected? It’s a wonderful feeling, all of a sudden you have some extra cash that in your mind was already spent.
But what happens when it’s the other way around? When a customer refuses to pay a bill, or your binding quote was only a fraction of what you should have charged.
The concept of conservative accounting says that you should always recognize an expense the moment that it’s a possibility. But that you should only recognize revenue when you are absolutely sure that all expenses have been paid.
Core accounting concepts can severely impact any business owner. It’s not just about hiring a third party to take over all the accounting needs. With the basic understanding of core accounting concepts, any small business owner can manage themselves.
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