How many hats do you wear within your company?
If you’re like most business owners, your role expands throughout the entire company. Supervising, content marketing, and onboarding new employees—there’s never a dull moment when you’re growing a business.
Trying to keep up with the daily demands makes it easy to forget essential accounting tasks that need to happen. To help you out, we’ve created this guide with some of the most important financial tasks for business owners to know about.
What are the most critical bookkeeping tasks to keep your company afloat? Read on to find out.
1. Common Accounting Work Terms
The first thing you can do to stay on top of accounting tasks is to familiarize yourself with the different types of financial terms. Terms like accounts payable, assets, and liabilities, are all a part of the record-keeping process.
Accounts payable is the money your company owes to any vendors or creditors. You can list accounts payable as liabilities since their items that you have to pay legally.
Assets would be anything that your company has ownership of that holds value. Equipment, real estate, and bank accounts are great examples of business assets.
Another term you’ll hear a lot is the profit and loss statement. The profit and loss statement is a type of income statement. It’s how you’ll be reporting all of your expenses, net profits, and earnings for a determined period.
Get comfortable with what a balance sheet looks like as well. Balance sheets are financial documents that help you get a quick look at your business’s financial standing. The balance sheet will be for a certain period, and it’ll list shareholders’ equity, liabilities, and your company’s assets.
2. Manage the Finances With an Entry System
You’ll also need to learn how to choose an entry system or accounting method. To complete small business accounting, you’ll need to decide between a single or double entry system.
Single entry means that you’ll be recording all of your transactions at one time. You can record these transactions either as an income or expense. Single entry accounting is very straightforward, and it works great for small businesses.
If you don’t have a ton of inventory or complex finances, then a single entry should be able to do the trick. Once you start moving into more complex accounting needs, you’ll need to invest in a double-entry accounting system.
Double entry means that you’ll be able to enter each action twice as both a credit and a debit. You’ll be balancing the books between accounts. The complex accounting system will help you prevent errors as you record transactions.
3. Accrual vs Cash Accounting Tasks
After deciding between single and double-based entry methods, you’ll need to pick an accounting method. The 2 choices you have are cash and accrual-based accounting.
Accrual-based accounting means that you’ll be recording all of your invoices and bills, even if the funds haven’t been transferred. Cash-based accounting means that you’ll only record transactions the moment money actually changes hands.
You won’t be recording any invoices about your company’s bills until the bills have been paid. We suggest going with an accrual-based accounting system since it tends to be more efficient. You won’t have to worry about dropping the ball and missing an important transaction.
4. Invoice Clients Regularly
When it comes time to manage the finances, invoice your clients immediately. Providing prompt invoices will make it easier for your customers to make timely payments.
Whereas, when you wait too long to send an invoice out, it’s easier for the payment to slip the customer’s mind. Another benefit of instant invoices is that it’s easy for customers to bring up any possible disputes.
Suppose there’s a discrepancy with the bill. Customers will find it easier to talk about an error a week later rather than a month later. At the end of the day, the longer you wait to bill your client, the longer you’re going to wait to receive payment.
5. View Quarterly Payroll Reports
Along with keeping an eye on semi-monthly payroll reports, you’ll also have to review the quarterly reports. Depending on the type of company you’re running, you might also have to provide the IRS with a quarterly payment.
If you have a payroll service provider, they’ll be able to complete these reports for you. Sites like tax fyle can help you find freelance accountants to make life easier. Your payroll service provider can also file the reports.
However, it’ll still be your job to review all payroll processes to make sure that everything is correct. If you notice any data that isn’t right, you’ll have to reach out to the payroll service provider right away.
Does your company operate in a state that demands sales tax? Double-check that you’re complying with all of the requirements. Failing to pay sales tax can result in severe penalties.
6. Providing Cyber Security Needs
Did you know that the FBI had a most-wanted list just for cybercriminals? At the top of the list is Park Jin Hyok, a computer programmer who cost Sony pictures entertainment tons of money. After a vicious Cyberattack on sony pictures entertainment, the hacker almost stole a billion dollars!
It’s clear to see that you’ll need to invest in the correct type of cyber security software.
Along with downloading a top of the line antivirus software, you’ll also need to regularly perform updates. Software companies are constantly improving their products, and the updates help you have the most efficient version of the software.
7. Simplify With a Checklist
Trying to keep tabs on all the little things you have to do for business accounting can be overwhelming. We suggest making things easier on yourself by splitting things up into a weekly, monthly, quarterly, and annual checklist.
Your weekly checklist can include things like reviewing employee timesheets. Whereas monthly and quarterly tasks can consist of reviewing payroll reports or reviewing sales tax reports.
As far as annual tasks go, you’ll want to include things such as reviewing your past due receivables and inventory. Business owners always have to be on top of checking their current inventory to determine the value of each item they didn’t sell.
The inventory you didn’t sell can be used as a deduction on your end-of-the-year taxes. If you don’t write down the unsold inventory, you’ll be overstating your balance and paying taxes on the money you don’t have.
Excelling at Accounting Tasks
It’s clear to see that there’s a ton of different accounting tasks that small business owners have to stay on top of. As you learn more about the ins and outs of managing your company’s finances, don’t forget about your cybersecurity needs.
There’s no point in growing your business and making more money if you’re only going to lose the profits to cybercriminals. Go ahead and double-check your antivirus and anti-tracking software today. When you’re ready to learn more tips, see what the rest of our blog has to offer.