7 Accounting Tips Every Small Business Should Know: Is a CPA Necessary?

Most small business owners aren’t accountants, CPAs, or bookkeepers, and it’s possible that they don’t know all about economics, tax planning, or business finance. It’s important that they learn about these topics because they are essential for their businesses. However, it’s advisable to hire a CPA or an accountant at specific times.

The seven accounting tips that every small business should know benefit both owners and employees alike. However, CPAs can offer assistance in your business situation to improve profitability and avoid bankruptcy. Nowadays, many firms have a team of accountants and CPAs ready to help you; one such firm is Evans Sternau CPA. You can get in touch with these professionals through their website.

Everyone can learn the nuts and bolts of accounting. It’s essential to understand your company’s financial documents as they can provide valuable insights into where to focus. Owning a small business is a challenge that entrepreneurs must address by understanding their financial situation on their own.

7 Accounting Tips

Finding a small business CPA near me isn’t a difficult task. Many specialized accountants offer their services online and can be hired on a full-time basis or for a specific project. Additionally to working with a CPA, it’s necessary for small business owners to also have knowledge of accounting, finance, tax planning, and more.

In almost all cases, accounting for small businesses is easy because they have a simple business structure. The three accounting priorities they must ensure are:

  • Ensure that income exceeds expenses.
  • Document all transactions and maintain transparent accounting books.
  • Pay all necessary and up-to-date tax obligations. In this case, the assistance of a CPA is essential for ensuring timely payments and minimizing the tax burden.

So, all 7 tips are important for overseeing the work of accountants and also for being able to handle certain tasks independently.

1. Separate Business Accounts from Personal Accounts

Many small business owners self-finance their businesses, and to avoid problems, it’s advisable to keep business funds separate from personal accounts. Here’s what you can do to achieve this:

Establish a solid business structure and legally decide whether it’s a corporation, partnership, or something else.

Open a business-only checking account. This allows you to pay employee salaries from the business account, eliminating the need to use personal funds. A business credit card can also be purchased for business expenses.

Consider opening a business savings account for investments or emergencies

2. Create profit and loss statements regularly.

Documenting the profit and loss (P&L) statement is a fundamental accounting tool to assess a company’s state during a specific period. Some businesses are even required to publish their financial and tax statements quarterly. Keeping track of your P&L statements offers insights into your progress towards financial goals and the need for adjustments. How to generate a P&L?

  • Sum up all the company’s quarterly revenues.
  • Detail all expenses for the same period, categorized for clarity.
  • Subtract total expenses from total earnings to calculate the period’s profit.
  • Account for all taxes and deduct them from the total profit.

3. Bill Accurately

Creating and sending accurate and timely invoices is vital to the business. Accuracy is crucial, as errors can impact the bottom line. To improve the invoicing process, consider these steps:

  • Send invoices promptly.
  • Ensure all information is accurate and thorough.
  • Utilize email reminders for payment.

4. Tax Planning

Small businesses are required to pay quarterly and annual taxes, including self-employment tax, Social Security tax, federal tax, and income tax on business earnings. Tax planning is essential, and with the help of a CPA, you can minimize payments and access economic advantages to save money and increase investment potential.

5. Hiring CPAs or Accountants

In many cases, it’s better to hire financial experts to handle all financial processes and functions. Small business owners often juggle multiple tasks, and dealing with accounting or bookkeeping can add unnecessary stress and hassle.

Hiring a Certified Public Accountant (CPA) can reduce accounting errors, ensure accurate and current business records, and save a significant amount of time.

6. Utilize Accounting Software

To improve finances it’s advisable to use suitable and up-to-date accounting software. Digital record-keeping enables real-time tracking of payments and eliminates the risk of paper losses. Modern accounting software is user-friendly and offers features such as sales tracking, budgeting, financial statements, payroll management, and tax calculations.

7. Calculate Comprehensive Labor Costs Before Hiring

Before hiring employees, it’s crucial to calculate all labor-related expenses beyond just salaries. This includes benefits, payroll taxes, vacation pay, bonuses, retirement contributions, and more.

By incorporating these 7 tips, small business owners can efficiently organize their finances and consider hiring a financial advisor to simplify and streamline the process. Additionally, trusted and experienced professionals can be found at Evans Sternau CPA and other reputable firms.

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