Small Business Accounting 101: 12 Steps for Basics and Setup 2023

This record of earnings and expenses will be sufficient for your accountant to fill out the tax forms for your business. Although bookkeepers are often referred to as accountants, there are distinct differences between the two positions. In addition, owning https://adprun.net/bookkeeper360-xero-accounting-bookkeeping-solution/ an accounting business typically requires a bachelors degree in accounting or finances—whereas owning a bookkeeping business does not require certification or a degree. Double-entry accounting enters every transaction twice as both a debit and a credit.

Is there a specific business niche that interests you (e.g. retail, automotive, or manufacturing)? The answers to these types of questions will more than likely drive the types of clients you end up working with. When you’re first starting out, your goal needs to be landing your first client. Once you’ve checked that box, you can begin developing your skills and refining your specialty.

Do your own small-business bookkeeping

Bookkeeping is part of the larger process of accounting, which is focused on interpreting and presenting the data in a business’s books. When all your expenses are being paid with one business account or card, you’re also making it much easier to keep detailed records. Clean records of your business expenses also help you take advantage of the small business tax deductions you’re entitled to as an LLC member.

Corporations and LLCs must use a separate credit card to avoid commingling personal and business assets. Lastly, you’ll file organizational paperwork with your state, and receive a certificate of operation that will include an identification number for tax purposes. This information will be helpful for things like setting up bank accounts and any other matters that require proof that your business exists. Small business owners should have both a business checking account and a business savings account. The checking account is used to receive customer payments and pay expenses and the savings account is used for tax obligations and unexpected business expenses.

Use simple bookkeeping software

All accounting features can be conveniently accessed on one main dashboard, making bookkeeping more fluid and efficient. QuickBooks Online is the best small business accounting software due A Guide to Nonprofit Accounting for Non-Accountants to its industry popularity and user resources. It’s important to continually reassess the amount of time you’re spending on your books and how much that time is costing your business.

Many small business owners feel their company is too small to bother with incorporation. Unfortunately, this leaves them open to a multitude of problems that could be avoided with a little paperwork and a small fee. An LLC is often the compromise between forming a corporation and working unprotected. Although the cash method is not as accurate as the accrual method, it has the advantage of delaying taxes until you have the funds in hand. With the example above, the income from that project would be taxed in 2020 even though you won’t receive it until 2021 under the accrual method.