Accounting is important for all businesses irrespective of their size. The objectives of accounting for small businesses are:
- Profits: Accounting helps small businesses keep a tab on the income and expenditure which helps you determine whether you are making a profit or not.
- Filing Returns: The statutory returns that need to be filed can only be possible if the required financial information is available on time.
Some businesses use the cash basis of accounting, while others use the accrual basis.
There are 3 steps followed by small businesses while maintaining their accounts. These are:
1. Receipts record
Small business accounting involves keeping receipts of all the sales and purchases so that a transaction summary is kept. Receipts are filed and entries are made in a cash register. For a growing business, automation is used.
2. Posting to ledgers
The ledgers are a summary of revenues and expenditures. Receipts are posted to the ledger on a regular basis which could be a daily, weekly, or monthly basis. The frequency of posting would depend on the volume of business. When the business grows, accounting software is used.
3. Financial Reports
Financial reports give you an assessment of the financial health of the business. Through these, you will also learn about the cash flow, the status of the debtors and creditors. The main financial reports are a cash flow statement, profit and loss account, and balance sheet.
A payroll outsourcing firm provides accounting and bookkeeping services. They handle all the accounting entries, tax compliance, bank reconciliation, vendor payments, employee reimbursements, and you get detailed Monthly Information Systems (MIS) reports.
What Are the Accounting Checklists for Small Business Owners in 2019?
Merely having an accounting system in place will be of no use, unless there are some accounting tasks that need to be done on a regular basis.
An accountant has the responsibility of ensuring that the accounting for small business are complete in every respect like selecting the right kind of software, advising on the right bank account to be opened, ensuring the accounting methods are in line with statutory regulations and financial analysis of accounting data.
These are the accounting checklists in 2019 for small business owners:
1. Updating financial data
It is important to keep your accounts up-to-date by syncing your bank and credit card payments with the sales data. This should be done through accounting software to better understand your cash flow.
2. Bank reconciliation
If your accounting software is linked with the bank account, you can keep a tab on any errors that might take place and correct them immediately on a daily basis. Therefore, mitigating your need for monthly reconciliations.
3. Deposit cheques
It is important for you to ensure that cheques are immediately deposited and online receipts are checked through net banking so that the cash flow is positive. Accounts receivable needs to be followed up on a daily basis so that there is no delay in the collection of payments. Your accounting software should be able to give you the net amount due from every customer at any given date.
4. Payment classification
Because you get the updated status of your income and expenditure through the accounting software, you don't need to go through all the expense vouchers at the end of the month. Just take a screenshot of the expense and note down whether it can be charged to the business or the project it belongs to.
5. Inventory records
Recording inventory on a daily basis makes sure of the latest position with regard to your stocks. This will ensure you don't miss out on a sale. Requisitions can be made immediately for items out of stock.
6. Regular invoicing
Invoices need to be sent to customers instantly so that any discrepancy can be sorted out well in advance. You can make the required changes without any delay and receive your payments on time.
7. Vendor payments
Just as in the case of customers, it is important to check the vendor's bills for accuracy. Any errors should be rectified immediately. If discounts are available for early payments, you need to avail it. You should also be up-to-date with your Accounts payable to ensure payments are made to vendors as and when they are due. The net amount pending vendor wise should be available from the software.
8. Regular backup
If you are using cloud-based software, you automatically have back up of all your data. In other cases, a manual backup is suggested as you might lose valuable data due to hardware failure or files being corrupt.
9. Cash balance
You should not have to regularly check your bank account to find out what your latest cash balance is. You should keep a tab on it on a daily basis, adjusting the balance for receipts and payments.
10. Tax compliance
An important task is ensuring that all the statutory deductions and payments like tax deducted at source (TDS), provident fund, employee state insurance are submitted on time. Paysquare deals with auditing queries and e-filing of statutory dues.
Hassle-Free Accounting for Business Success
Accounting is an important function of the business, not only because it helps you understand the financial health of the business but also because there are some statutory regulations that need to be complied with. Non-compliance has serious consequences.
With over 17 years worth of experience in the payroll processing and compliance industry, Paysquare has a team of highly experienced professionals who will make sure that the accounting for your business in accordance with the statutory regulations, e-filing your returns on time so that you can concentrate on the growth of your business.
Ensure higher profits by partnering with Paysquare!