Why Does a Small Business Need Accounting Services?
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Running a small business requires doing the work of accounting. However, retaining professional accounting services can reduce error, increase efficiency, and ultimately help small business owners make smarter decisions and investments.
Small businesses need accounting services to produce accurate financial records, provide professional tax consultation, and ensure compliance with state and federal tax law and other business regulations.
While all of these services fall under the umbrella of accounting, accounting usually refers less to recordkeeping and more
to analysis and evaluation. While recordkeeping is about gathering and preserving data, a lot of accounting is working
with that data and generating concrete decisions or advice based on that data.
Here are some of the main different types of accounting with Services by Professional Accounting Software
and if needed, trough Third Parties:
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Management Accounting
Management accounting is the kind that most often comes into play for small businesses. A management or managerial accountant will help you review your finances, study market conditions, and plan for the future. They give you what you need to manage your business more effectively.
These accountants put together forecasts for business cash-flow and growth so that owners can make more informed short-term and long-term decisions. Management accountants can also help small business owners better understand performance variances in their own business and therefore find a way to respond and improve.
Bookkeeping is about maintaining accurate and comprehensive records. This is the bread and butter of accounting. Without data gathered by bookkeeping, accountants have nothing to work with.
Record Keeping for small Businesses can provide an up-to-the-minute snapshot of a company’s financial situation and health. It involves keeping track of all inputs and outputs and double-checking everything to make sure it’s been properly recorded.
The general ledger is the central document a bookkeeper works with, as it contains all a business’s accounting data. Then when it’s time to file for taxes or apply for a loan, a bookkeeper can produce a financial statement just by putting together the financial records for a given period.
Bank Reconciliation
One of the reasons professional bookkeeping services are so important is because of human error. Any process run by people is going to make mistakes. That’s inevitable, and a good bookkeeping system will catch those mistakes. That’s where bank reconciliation comes in.
Bank reconciliation is a process of assessing and comparing your financial records to those of your bank and fixing mistakes if the records don’t match the way they’re supposed to. You process payments and then deposit those payments in the bank. If your records are accurate, your payments record should perfectly match the bank’s record of deposits.
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Accounts Payable
Accounts payable are an essential part of your general ledger and a key indicator for assessing your company’s financial situation at any given moment.
You should keep track of all of your payments and expenditures under accounts payable. As soon as you plan or schedule an expense, it should be recorded in this account. As soon as you order more stock for inventory, that cost goes here, even if you haven’t yet paid that bill.
Keeping track of cash payments, you make will give you a sense of how much money you have on hand. However, accounts payable is a category that includes future expenditures as well, which helps you plan. If you have an interest payment on a business loan due in the next month, you can plan appropriately to have the money when you need it.
Accounts Receivable
Accounts receivable are all expected or scheduled proceeds or sources of revenue. If a customer buys a product on credit or with an extended payment plan, you need to know when you expect to receive that income. You might not be able to receive that cash right away, but you can plan future expenses based on the expected in-flows from those accounts receivable.
The category of accounts receivable on a general ledger is important because it lets you look ahead and plan. The more informed you are about your company’s financial situation, the better prepared you are to adjust and adapt as needed.
Payroll processing is another important accounting service. Managing a regular payroll and records can take up a lot of time and effort, even for a small business without too many employees. Accountants work with businesses to organize and automate payroll systems to work better for both employers and employees.
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Accounting services regarding payroll can involve gathering employee information, establishing a time tracking system, and managing the actual processing of payments to staff.
Even if the system is mostly automated, accounting work in this arena still involves approving and submitting payroll, reporting, and updating records, and working with employees to address any issues.
Many entrepreneurs work with accountants as they create business plans, even before the business has been established. Accountants can be valuable partners in building a compelling business plan and discerning which business entity is right for the owner’s vision.
Accountants can help a small business owner settle on a company name, gather company information, register for an employer identification number, and register their company with the state.
