“Daily, thousands of businesses around the world are set-up in the hope that these business would make profit and deliver services to the market. Entrepreneurs get involved in
all aspects of the business set-up such as getting a license, registering the business name, promotions, networking, and even hiring employees.
Most owners get so excited by the image of their business that they spend more time on creating an image, designing a logo or even doing a door-to-door campaign in the community. Although these activities contribute to the start-up, they are not as important as setting up an accounting system for the business. Why is small business accounting important? There are many good reasons why an entrepreneur must pay attention to this aspect of the operations because for the first obvious reason: money is the medium of exchange.
No matter what service or product a small business offers, there is a need to transact with money either through buying or selling. Even if one’s signage or business card is impressive, an entrepreneur without a concrete understanding of small business accounting would not survive the competition. It must be remembered that the first requirement of a business is profit since without it, the business would die.
Having a business no matter how small has its expenses such as utilities, salaries, and even promotions. It is highly advisable then to learn small business accounting which is actually very basic in order to keep your business running and growing. A good entrepreneur would take time to sit down and crunch numbers. There is a need to draw a budget, which is actually a plan in quantitative format. It is basic in small business accounting to distinguish which type of accounting method one would use for the business. One can choose accrual or cash accounting.
According to Investopedia cash accounting is recording the receipts once a sale is received. This is a simple way of updating records. On the contrary, accrual accounting is recording only revenues or expenses once they are incurred. Some state regulations suggest the accrual method since this type can give you an overview of the financial health of the business. Another important skill that must be learned in small business accounting is bookkeeping – that is recording transactions. If the owner can afford to hire, this service would be efficiently done by a bookkeeper. Following the aforementioned steps would help a new business gain solid ground.”