Bookkeeping And Accounting Papers
15-Oct-2020 By - team

Could you be your own accountant?

If you’re thinking of starting your own business, you need to start investing in the tools and resources that will make your job easier and put you in a position for success. Part of that investment is figuring out which aspects of regular business maintenance you can do yourself, as opposed to hiring expensive contractors to do the work for you. But there’s a fine line when it comes to what falls under the DIY umbrella—you wouldn’t want to provide your legal advice, for instance. So where does accounting fall in this conversation

Blog Verticle Cta Img
Get started today

Got questions? We have answers

03 9568 5444

If you’re thinking of starting your own business, you need to start investing in the tools and resources that will make your job easier and put you in a position for success. Part of that investment is figuring out which aspects of regular business maintenance you can do yourself, as opposed to hiring expensive contractors to do the work for you. But there’s a fine line when it comes to what falls under the DIY umbrella—you wouldn’t want to provide your legal advice, for instance. So where does accounting fall in this conversation? Does it require professional accountants or can you take on some of the bookkeeping responsibility yourself?

Whether you’re looking to organize your new small business, or are just in need of some personal financial organization, an accountant seems like a great idea. They’re like the fairy godmothers and fathers of tax season. And they’ll come in especially handy when you’re flipping through a pile of uncategorized receipts trying to do your taxes. Accountants are cool, but a lot of what they do we can do ourselves. It helps to get an understanding of the best financial practices in order to make accounting a lot more than just a “dismal science.”

Open a Business Bank Account

You want to keep your personal and business banking separate. This may not seem critical at the beginning, but down the road, it will save you a lot of time when you have more business transactions to manage. Banks offer a wide range of accounts specifically for business, and some are designed for very small companies that have few or no employees.

Before you visit a bank to open an account, best to consider your financial needs first, look at how many transactions you’re going to have in a month and compare that with what the bank will charge you. If you’re a small business with few deposits or expenses, it may be worth considering an account that charges you per transaction. Some banks have business accounts that will waive the monthly fee if you carry a minimum balance from month to month. You’ll also want to make sure you choose the overdraft protection option for when you need it.

In your meeting with the bank representative, don’t get distracted by offers of business credit cards with rewards or other incentives that are designed to get you to sign up. You can consider them but decide if they are worth the extra costs involved. What you want to know is if this bank will offer a convenient service with easy online tools, at a reasonable price, and will be able to help you in the future with loans or extra credit if you need it.

Establish a Bookkeeping System

Are you going to go with a single entry system of accounting or double entry?

A Single Entry System of accounting is a form of bookkeeping in which every one of a company’s financial transactions is recorded as a single entry in a log. New small businesses usually use this process because of its simplicity, cost-effectiveness, and the fact that it requires no formal training.

A double-entry system requires a much more detailed bookkeeping process, where every entry has additional corresponding entry to a different account. Consider the word “double” in “double-entry” to stand for “debit” and “credit”. The two totals for each must balance. Otherwise, there is an error in the recording.

A double-entry system will provide complete records and allows for the creation of proper financial statements. There are many software options available today that make a double-entry system of bookkeeping easier to manage.

 

Track your expenses

The foundation of solid business bookkeeping is effective and accurate expense tracking. It’s a crucial step that allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and legitimize your filings.

From the start, establish a system for organizing receipts and other important records. This process can be simple and old school (bring on the Filofax), or you can use a service like Shoeboxed.

There are five types of receipts to pay special attention to:

 

  • Meals and entertainment. Conducting a business meeting in a café or restaurant is a great option, just be sure to document it well. On the back of the receipt, record who attended and the purpose of the meal or outing.
  • Vehicle-related expenses. Record where, when, and why you used the vehicle for business, and then apply the percentage of use to vehicle-related expenses.
  • Receipts for gifts. For gifts like tickets to a concert, it matters whether the gift giver goes to the event with the recipient. If they do, then the expense would be categorized as entertainment rather than a gift. Note these details on the receipt.
  • Home office receipts. Similar to vehicle expenses, you need to calculate what percentage of your home is used for business and then apply that percentage to home-related expenses.

 

Starting your business at home is a great way to keep overhead low, plus you’ll qualify for some unique tax breaks. You can deduct the portion of your home that’s used for business, as well as your home internet, cell phone, and transportation to and from work sites and for business errands.

Any expense that’s used partly for personal use and partly for business must reflect that mixed-use. For instance, if you have one cell phone, you can deduct the percentage you use the device for business. Gas mileage costs are 100% deductible, just be sure to hold on to all records and keep a log of your business miles (where you’re going and the purpose of the trip).

Set up a payroll system

Many online stores start as a one-person show. When you’ve reached the point where it makes sense to hire outside help, you need to establish whether that individual is an employee or an independent contractor.

For employees, you’ll have to set up a payroll schedule and ensure you’re withholding the correct taxes. There are lots of services that can help with this, and many accounting software options offer payroll as a feature.

For independent contractors, be sure to track how much you’re paying each person. American business owners may be required to file 1099s for each contractor at year-end (you’ll also need to keep their name and address on file for this).

 

Keep impeccable records

A wise accountant once said, “You’re only as good as the records you keep.” Memorize this mantra and write it on a note above your door. Laziness is the enemy of accounting. The best way to keep records is to have both a physical and a digital file. Go out to your nearest office supply store and pick up a nice, sturdy file cabinet, hanging folders, manilla envelopes, and some labels while you’re at it. Keep it simple. Alphabetical order works best.

Develop a bookkeeping system and stick to it

Expanding on point one, you’ll need to employ a process for bookkeeping. As soon as a check comes in, for example, make a copy of it to store in your physical file and a digital file, then make sure it is logged out, and a receipt is stapled to the invoice. Then deposit it and label the payment appropriately in your bank account so that it doesn’t just say “Deposit.” Down the line, you’ll likely forget what that random deposit was for.

Don’t throw out your receipts, file them

Today, receipts are both printed and digital, so to keep track of them, you should scan all of your physical receipts into a digital file with your emailed receipts. Categorize them. Here is a sample of small business categories that can be customized to fit your business.

Use the right software

While Excel spreadsheets are a great way to stay organized, you may want to invest in accounting software. Quickbooks is one of the most widely used and has a convenient online version. With it, you can generate valuable reports, track invoices and payments, and reconcile your accounts. It gives you an organized overview of your revenue and is a great resource for the small business.

Mark on your calendar when payments are due

Trust your calendar to tell you when you need to get paid and make sure that you keep a record of “aged” receivables that are overdue. Log follow up emails and phone calls in writing so you can provide evidence of a follow-up when your vendor acts confused about a payment. Written documents will always be on your side.

 

Reconcile your accounts every month

Account reconciliation is super important. It’s a way to make sure what is in your bank account matches what is in your records. Quickbooks has an easy account reconciliation step-by-step process. Making sure you do this every month will make keeping your accounts less overwhelming than waiting until the end of the year to do everything.

Bg 03 Free Img

Enrol in a payroll service that automatically withdraws tax and deductions

If you have employees, a good payroll service will take care of all the tax deductions for you when you set up a W-2. ADP is one of the top companies that handles all of that. For more on them, check out their website.

 

Become best friends with your P&Ls

As a business owner, it’s vital to be able to see the big picture of your company. A profit and loss report will show you all of your expenses categorized as well as your net income. You can compare these P&Ls years over year, or even month over month, to see if certain expenses are staying constant, rising, or falling seasonally. Here’s more on how to understand your P&L.

Keep up with your taxes

You’ll likely need to make a quarterly tax payment if your company operates in a state with sales tax. You can also use your year-to-date P&L to determine if you owe any estimated taxes for the quarter.

That wasn’t so bad, was it? We’re not out to put accountants out of business, but by understanding a bit of what they do, you can take control of how you run things. And hey, if you like it, you might want to become a CPA.

Establish sales tax procedures

The world of eCommerce has made it easier than ever to sell to customers outside of your state and even country. While this is a great opportunity for brands with growth goals, it introduces confusing sales tax regulations.

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 in that city or they’re visiting from somewhere around the world. However, when you sell online, customers may be located in different cities, states, provinces, and even countries.

Apply for funding

There are many scenarios where a growing eCommerce business might need to secure external business financing, be it through a line of credit, investors, a small business loan, or even a business partner.

For instance, you might have an unexpected downturn in sales due to uncontrollable external circumstances, or maybe you need a financial boost during slow periods in a seasonal business. Brands with big growth goals often need to secure funding to make investments in new product developments, inventory, retail stores, hiring, and more.

Remember, to get a small business loan, and you’ll likely have to provide financial statements—a balance sheet and income statement at the very least, possibly a cash flow statement as well.

But before you sign off on the debt, it’s important to make sure the numbers make sense. In other words, it’s a good idea to calculate the ROI of the loan. Add up all the expenses you need the loan to cover, the expected new revenue you’ll get from the loan and the total cost of interest. You can use our small business loan calculator to find out the total cost.

How do you keep accounting records for small business?

You can set up basic small business accounting records in a spreadsheet. However, this is more tedious, prone to manual errors, and time-consuming than a comprehensive small business accounting software. At the very least, you’ll want to track expenses and income in a secure cloud-based platform.

What is the easiest accounting software for small business?

There are many user-friendly accounting software options for small businesses, ranging from free to paid models. In our small business account tools roundup, we recommend checking out easy-to-use software like Quickbooks, Freshbooks, Xero, and Zoho Books. You can also browse the Shopify App store for accounting software that will seamlessly integrate with your eCommerce store.

How much are accounting fees for a small business?

Accounting fees vary wildly based on your business structure, needs, technology and tools, and hired experts. Some accounting software, like Wave, is free to sign up—though you’ll have to pay to use features like payment processing. Other tools may cost hundreds of dollars per month, though these typically come with additional features like an open API, customer support, and other business management features.

How much is an accountant for a small business?

Small business accountants range in price, depending on a number of factors.. If you’re outsourcing to an external contractor or one of many accounting firms, costs vary from a few hundred dollars per month to thousands per month—depending on the level of services provided and complexity of your small business accounting needs, among other factors.

 

Other Considerations for Doing My Accounting

The tasks of an accountant vary, but typically they oversee and work in the following areas: data management, financial analysis and consultation, financial reports and regulatory compliance. What we have outlined above is the basics for being your small business accountant, but you may find you will need to contact and enlist the help of a professional accountant as your business grows.

Starting a business can be an overwhelming process, but if you follow this list, you’ll have your new store’s finances in order from the beginning. From opening the right type of bank account to determining how much you’ll bring in per product, these tasks will all contribute to your business’s success, now and as it grows.

 

 

DISCLAIMER
THIS WEBSITE CONTAINS GENERAL ADVICE ONLY AND IS NOT PERSONAL FINANCIAL OR INVESTMENT ADVICE. ALSO, CHANGES IN LEGISLATION MAY OCCUR FREQUENTLY. WE RECOMMEND THAT OUR FORMAL ADVICE BE OBTAINED BEFORE ACTING ON THE BASIS OF THIS INFORMATION. INFORMATION CONTAINED HEREIN HAS BEEN SECURED FROM SOURCES EWM ACCOUNTANTS & BUSINESS ADVISORS BELIEVES ARE RELIABLE, BUT MAKE NO REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OF SUCH INFORMATION AND ACCEPT NO LIABILITY. WE SUGGEST THAT YOU CONSULT WITH A TAX ADVISOR, CPA, FINANCIAL ADVISOR, ATTORNEY, ACCOUNTANT, AND ANY OTHER PROFESSIONAL THAT CAN HELP YOU TO UNDERSTAND AND ASSESS THE RISKS ASSOCIATED WITH ANY INVESTMENT.

Guest post by : team Form -

Like this? Share it...