Accounting for Startups: Small Business Accounting
One of the most important aspects when starting or operating any new business is accounting. It is very easy to become overwhelmed with other tasks when opening a business to look over the accounting needs that you have. After all, it is much easier to select a business card or hire a manager than to think about the financial aspect of the business. However, if your business lacks a solid understanding of the financial components of operation, your business may not survive past the first few years.Â
The annals of entrepreneurship are overflowing with former business owners who did not understand the importance of accounting for their business startups. Many of them discovered too late in the game that they were not operating at a profit, but at a loss. Absent a firm knowledge of your businessâ€™ cash flow, you can end up losing your business before you know what hits you.
There are two methods for small business accounting that are normally accepted â€“ cash accounting and accrual accounting methods. The type of accounting method that is used for your business may be just a matter of preference, but some businesses are required under law to use the accrual accounting method. The accrual method of accounting will show the financial health of your company in real-time, and it is the preferred method by many businesses. Most accounting software that is used for businesses can move from accrual to cash accounting by simply checking a box. For those businesses that are simple and donâ€™t generate a lot of revenue, the cash accounting method is by far simpler, and most accountants for small businesses recommended the cash accounting method.
Choosing a Professional Accountant
Most people are not that good with numbers, and the majority of small business owners have no idea how much accounting and bookkeeping is involved in running a small business. Having a professional accountant on the payroll is now as easy as hiring a remote accountant who does not have to have his own office in your business. More and more accountants are offering accounting services online via the Internet, and they are accessible to their clients via email, phone, fax, and other modern communication methods. When hiring a well-trained, certified accountant for your bookkeeping and accounting needs, you can be assured that youâ€™re getting quality service for less. You wonâ€™t need to offer benefits and medical to this employee as they are considered to be an independent contractor. Thatâ€™s a big plus for your business.Â
It makes sense for growing businesses to hire an outsourced accountant to keep their expenses in check. The cost of an in-house accountant is much more than most small businesses can afford. The outsourced accountant works only when you need him, which makes it easy to have professionally prepared reports when required, and of course, to do quarterly and annual tax preparation. And in this instance, outsourcing does not necessarily mean that someone in India or the Philippines would be handling your financial documents and preparing your reports and so on, although there are certainly well-qualified accountants working from these countries.Â
However, there are many U.S. based accountants offering their work on a freelance basis via accounting outsourcing, as well. This means that no jobs are leaving the country, which is important to many small business owners.