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Accounting can be confusing and stressful, especially when it comes to doing it on your own without help from someone who’s an expert in this field. Luckily, there are plenty of online resources that will help you with every aspect of accounting and help you keep your books in tip-top shape while saving you time and money. This guide will introduce you to the basics of accounting, explain why and how to do it, and provide links to several excellent resources that will help you get started right away!
If you want to learn how to do accounting for small businesses, here’s where to start! Owning your own business can be very rewarding, but it does come with certain challenges when it comes to accounting. Fortunately, the process of accounting for small businesses isn’t particularly difficult if you’re familiar with the principles of financial accounting and know how to use the right tools, like QuickBooks Online, in order to keep track of your expenses and income. Today we’ll look at the basics of small business accounting so that you can get started without feeling overwhelmed by the process.
Basic accounting for your business
Setting up accounting systems for your business is essential. It doesn’t matter whether you have a side-hustle or run a full-time enterprise, you’ll need records that show how well your business is doing. And even if it’s just you and a few employees, knowing exactly where your money goes each month can help guide future decisions which means spending less in areas where profits are down and improving areas where they’re good. An organized accounting system helps keep you on track! Here’s how to set one up
1. Create an accounting program Most people who own their own business will use some kind of accounting software such as QuickBooks to keep track of all their financial transactions. This allows you to stay on top of everything from invoices to payments and taxes so that you always know what’s going on with your finances, especially when things get busy with work.
2. Keep financial documents Another important part of any accounting system is keeping detailed documents about all transactions this way, you can easily tell what expenses were made when who paid them, and how much was spent overall. Some people like using physical folders or binders for these documents but there are also plenty of apps available for tracking receipts too!
Register with HMRC
All registered businesses in the UK are required to have a unique reference number and it’s important that your business has one too. Your Unique Tax Reference (UTR) is also known as a Corporation Tax Number, Unique Business Tax Reference or an Employer’s Registration Number. The UTR acts as your official registration with HMRC and enables you to file taxes and claim tax reliefs on behalf of your business.
This is why we say registering with HMRC is so vital for any UK-based business owner or startup entrepreneur, because, without one, you’re not legally entitled to file tax returns or make valid claims. That said, setting up your company shouldn’t take long at all; it involves filling out some online forms, but they don’t need much more than basic details.
Get the right software
The first step in doing accounting for small businesses is getting yourself organized. Most of your business’s financial information will be stored on a computer, so it makes sense to use a software program that works well with most computers. You don’t have to get an expensive program. In fact, you can find plenty of inexpensive or free accounting software on websites like CNET and PCWorld or at stores like Best Buy and Fry’s Electronics. Even Microsoft Office offers its own version of basic bookkeeping.
If you plan to run more than one type of business, then consider using separate programs for each one. That way, each kind of business has its own set of data files and books. For example, if you run both a retail store and a restaurant, then use QuickBooks for your retail store accounting needs and QuickBooks Pro or another program for your restaurant accounting needs. Remember: It doesn’t matter what software package you choose as long as it gets the job done!
Keep good records
If you’re starting a business, your first step is figuring out what to do about taxes. Luckily, as a small business owner, you have plenty of options for keeping good records. The simplest and most popular method is simply keeping track of your income and expenses in a spreadsheet or on paper. However, if you’re looking for something more robust something that will help your accountant help you then consider using an accounting software package.
Accounting software packages are available at different price points and provide varying levels of functionality. Shop around before making a decision so you can find one that fits within your budget and meets your needs. Remember: You don’t need any special accounting software to start; just keep good records!
Be accurate when recording expenses, sales, and income
No matter how big or small your business is, you need to keep accurate financial records. As a business owner, it’s your responsibility to report these numbers accurately on tax forms and other documentation. To start, decide on accounting software that will allow you to record receipts, purchase orders, and banking information in a methodical way. The Strong Steel Manufacturers industry relies on raw materials, the extraction of which takes time. This is also a business.
Small-business accounting software is generally less expensive than high-end systems used by large corporations, but these tools still tend to be more costly than traditional spreadsheets or calculators. So if you’re starting a business on a budget (and who isn’t?), be sure that your system makes sense from both an operational and an accounting perspective before you dive in headfirst.
Understand VAT (Value Added Tax)
VAT is a tax added at each point in a supply chain. When you’re starting out as a business owner, it’s important to understand how VAT works so that you don’t get hit with an unexpected bill later on.
This is especially true if your company will be selling goods and services directly to customers when your customers are charged VAT, you must pay it too. Understanding how VAT works before getting into the business will help you avoid surprises when it comes time to file taxes.
Monitor cash flow
The business lifeblood is cash. Period. Even if you have a steady flow of customers, cash reserves are necessary for meeting payroll, paying taxes, and other unforeseen expenses. To monitor your company’s cash flow, keep an eye on three key areas: accounts receivable money owed to you, payables money you owe vendors, and cash on hand actual money in bank accounts.
If any one of these numbers is significantly higher than it should be or significantly lower you’ll know something is wrong. For example, too many unpaid invoices can mean that customers aren’t able to pay as expected; too many outstanding checks means you haven’t collected what you were owed and are overextended with bills.
Create an accounting system that works for you
The most important thing is to set up a good accounting system so you can keep track of your numbers. If you’re just starting out, then that may mean using a simple spreadsheet. If you have more revenue, it might mean taking your business seriously enough to invest in software like QuickBooks or Freshbooks. It could also mean hiring an accountant. No matter what, get organized and keep records so you can effectively keep track of where the money comes from and where it goes and tweak as needed!
Conclusion
When you are starting your own business, it is important that you find a way to get organized so that everything can run smoothly. Accounting is one of those things that can help your business run more efficiently. By putting an accounting system in place, you will be able to better manage your money and focus on growing your business as well as creating a budget plan. All of these are essential parts of running a successful company. With these tips, you should be well on your way to finding ways to keep your books organized and do accounting for small businesses!
