Small Business Accounting Tips That Will Save You Time, Cash and Tax

Small business accounting tips don’t have to send you running for the hills. Perhaps the expression small business AccountingIt sends chills down your spine. Or maybe it’s something that you know is important, but don’t particularly love spending time on. 

One thing’s for sure. When you get a good grasp of basic accounting and bookkeeping, you get a better understanding of your small business’s strengths and weaknesses. 

You can also use your accounting skills and bookkeeping to help you grow your business.

That’s what this article is all about, giving you a primer on accounting that will hopefully stand your small business in good stead for the years ahead. 

We’ve asked accounting experts and small business owners just like you to explain:

Let’s start by talking about that business bank account and why you should separate your personal and business income and expenses.   

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Register for a Business Bank Account

Small business owners often have some business-related funds mixed up with personal funds. It is not something you should do. 

Barb Weidner was the CEO and cofounder of Online Lending Marketplace. Fast Capital 360As one of her best small business accounting tips,, recommends that you open a bank account for your business as soon as possible. 

“Not establishing a business bank account can become an accounting nightmare when trying to separate business and personal expenses,” said Weidner. “Muddy waters in this area are never welcome when it comes time to file your taxes,” she said.

Tip: “Remember to check the banking fees first before diving into a well-marketed bank account. Some fees are very high, there may be flat fees or there may be a fee per transaction,” said Richard Ford, co-founder of Hart Accounting Services

 

Bookkeeper and accountant to hire

Here’s another choice you should make as early as possible is whether to do your own ‘books’ and tax or get a professional to handle them for you.

A lot of small-business owners attempt to do both the bookskeeper and accountant jobs. But let’s be honest here, don’t you have enough to do already?

A professional accountant can help you with these tasks and will likely know more than you as a business owner about how to lower your taxes.

Make sure your accountant is in touch with your bookkeeper

And your relationship with your accountant and bookkeeper doesn’t need to revolve around tax time either. “Even if you’re busy, stay in touch with your accounting team,” said Ethan Howell, co-owner of Florida Environmental. “Consider them as business advisors. Partner who is able to help with finances, taxes and budgeting. Never be afraid to ask them to define a phrase they use in an email or document,” he said. 

 

How should income and expenses be reported?

You’ll also need to decide whether to use Cash-based AccountingOr Accounting accrual

CertainTalk to your accountant if necessary. But let’s break down this important choice, with a quick explanation of what each of these reporting methods are all about, plus some thoughts from various accounting experts. 

What is accrual accounting and how does it work?

Here’s how Tyler Davis, CPA, of Simplify LLCIt is explained here:

“Accrual accounting requires businesses to report income Once the revenue is earned Instead of When the cash has been received. A accrual account is also available. Note that expenses can only be recorded once they are incurred and not after they have been paid. The accrual method of accounting restricts flexibility to business owners in the reporting of income and expenses. 

When is accrual accounting appropriate?

Businesses that are:

  • Are larger
  • Have inventory
  • Shareholders and Investors
  • Complex structures are better

Tim Yoder CPA is a Tax and Accounting Analyst who says small businesses still have the ability to use accrual methods for their internal purposes. FitSmallBusiness. “This is helpful so they get a better measure of profitability by Recognizing income and expenses when they are incurred, rather than paid. You can give your tax preparer accrual-basis financial statements and they can very easily convert them to the cash basis for your tax return,” he said.

What exactly is cash accounting?

Again, here’s how Tyler Davis, CPA, of Simplify LLC, explains it: 

“The cash method allows business owners to Report revenue when cash has been receivedLet’s go! When expenses are actually paid, report them. Having control over the timing of revenue and expenses provides small businesses with tax planning opportunities at the end of the year.”

Cash accounting: When should it be used?

Businesses that use cash accounting might be able to:

  • Are they smaller
  • You do not need inventory
  • Not products, but services.

“Unless you benefit from accrual significantly, stay with cash or hybrid accounting in your early years,” suggests Crystal Stranger, an enrolled agent (EA), International Tax Director at GBS TaxAuthor of Guide for Small Business Tax

“It is easy to switch from cash to accrual with the IRS, but nearly impossible to switch the other way around. Cash is simpler for most entrepreneurs to understand, and accrual too early can lead to some unpleasant surprises on the tax end if you don’t have an in-house CFO watching the balance sheet closely,” she added. 

Hybrid method

This means that you can rely heavily on cash, but also keep an eye out for accrual. “Most accounting software allows you to switch between cash and accrual accounting,” said Mike Jesowshek, CPA, the Founder and The host of the Small Business Tax Savings Podcast. “So you have the ability to run on a cash basis but still track accounts receivable (AR) and accounts payable (AP) for internal purposes so you are keeping track of outstanding items.” 

 

You should earn a wage

Here’s one of the often-overlocked small business accounting tips for the early days, pay yourself properly. 

A regular and predictable salary is a great way to keep your business running smoothly. Brett Larkin was the founder and chief executive officer of Elevated YogaThis, according to, will simplify your life and make it easier than constantly using the business account to pay for personal expenses. “It makes it simpler to stay within budget, less stressful to track, and it reinforces the all-important idea that your business and personal accounts are entirely separate,” he said. 

 

Get bookkeeping software

Whether you’re doing your own books and tax or getting professionals to handle them for you, you’re going to need reliable bookkeeping software too. 

Cloud-based bookkeeping and accounting softwareIt is an important departure from old times when it was necessary to manually calculate, go through paperwork and check spreadsheets. 

“With cloud-based software, you can automate these processes and make your life much easier,” said Alex Williams, CFO of FindThisBestThis guide will help you shop for retail products. “Choose from any of the numerous software options out there and automatically send invoices, track expenses and generate reports.”

Small Biz Sense Accounting is worth considering

Small Biz Sense accounting empowers small businesses to send all of their sales data straight to a variety of accounting software like Quickbooks, Xero and Sage. We recently introduced accounting integrations for small businesses.

  • Automation automates manual processes to reduce errors and human mistakes
  • Offer an automated summary of daily sales
  • Tracks revenue streams across multiple locations.

Small Biz Sense AccountingUsers spend an average of five minutes per day doing bookkeeping tasks which would have taken hours manually. You must be a Small Biz Sense client to use Small Biz Sense Accounting Integrations.  

 

Payroll laws must be followed

Pay attention to state- and national labor and payroll laws. 

Implement a system to ensure you’re following these laws and staying up-to-date on the latest changes regarding payroll management, suggests Brad Tousenard, founder & CEO of SpinupWPSoftware company that offers a WordPress-specific cloud-based control panel. 

“Be aware that remote employees that live in a state with state income tax are required to have state income tax deducted from their wages and remitted to their home state. For states with income tax, it’s your responsibility as the employer to ensure the taxes are deducted correctly and paid on time to the relevant state agency,” he said. 

 

Forecast and budget

There are numerous apps and software available that will help you accomplish this. In reality, forecasting will likely be less important in the initial stages of a project than budgeting. 

“As a small business owner, budgeting was never easy for me,” said Sara Cemin, founder and editor of Realiaproject.orgThe company creates forms and templates for academics as well as businesses.

“What I’ve learnt over the years is that you must check your historical performance. This can be used as leverage when creating your budget. Additonally, you should keep some extra cash handy for any bad days or bad months,” she said. 

 

All your accounts for small businesses should be kept in mind

Accounting is more than just reporting income and expenses. It’s a discipline that can become a central driver of your small business’s performance. 

Small Biz Sense is a tool that can simplify accounting for small businesses. It will help them maintain accurate data on revenue and expense. Talk to our expertsSee how Small Biz Sense could simplify your accounting and other tasks today.

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Cyndy Lane