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Small Business Accounting Basics

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Unfortunately, running your own business comes with several time-consuming but unavoidable bookkeeping, tax, and accounting tasks. Although they might be frustrating, these tasks are crucial to keeping your business safe and compliant in the eyes of the taxman and generating valuable information that you can use to run your business more effectively. 

The reality these days is that the vast majority of small businesses use cloud accounting software to make day-to-day accounting tasks much easier, while some also work with an accountant who takes care of their filing obligations on their behalf. However, to run the finances of a small business effectively, there are still several important steps you must take yourself:

What are the Small Business Accounting Basics you Need to Take Care of?

(1) Open a separate business current account

All limited companies are legally required to have a separate business bank account. Although sole traders are not legally required to open a separate business account, doing so will save you some serious headaches along the way and make it easier to keep your finances in order. Consider factors such as transaction fees, withdrawal fees, introductory offers, admin features, and the level of customer support that’s available when choosing your business account. 

(2) Choose cloud accounting software

Almost all but the smallest businesses invest in some form of cloud accounting software. Cloud accounting software can be a perfect solution for business owners who prefer not to hire a professional due to the costs involved. Cloud accounting software is often used in conjunction with a professional small business accountant to make sure all their accounting and tax obligations are met for growing limited companies. 

Xero, QuickBooks, and FreeAgent are all popular examples of accounting software that can be used. They all offer a free 30-day trial, so you can find the best fit for your business before you commit. 

(3) Consider hiring an accountant

Keeping on top of your accounting obligations is an ongoing job. In the early days, you might be able to submit your tax returns on time and file the company accounts yourself with the help of your cloud accounting software. However, as your business grows, you’ll find you have less time, and your company accounts become increasingly difficult and time-consuming to produce. 

SUMMARY

From cash-flow forecasting and help with tax audits to loan applications and VAT registration, small business accountants will help to keep the financial side of your business in check. As well as the obvious benefits such as eliminating accounting mistakes, avoiding late filing penalties, and freeing up your time, working with an accountant will:

  • Make it easier to obtain a loan as lenders will have more confidence in the accuracy of your financial documents
  • Give you greater insight into the financial performance of your business and where improvements can be made
  • Offer advice to help you grow and develop your business
  • Reduce your tax liability and help you take money out of your business in the most efficient way