Small Business Accounting
Section 5. - Accounting
I made "small business accounting" a major section of this web site because it is one of the most important functions of running a business…and yet, most small business owners give it short shrift. Of all the troubled businesses I have looked at, I have never seen one that had a good up-to-date small business accounting system in place. Good accounting may have kept them out of trouble all along. If you are an entrepreneur starting your first business, I’ll bet you have not given a lot of thought to your small business accounting system (unless you are an accountant). Very few do, so you are not alone. And yet, it is one of the single most important aspects of starting up and operating your small business.
Obviously, you want your invoices or billings to go out quickly, and accurately, with collections up to date, and money deposited in the bank as quickly as possible. You also want all the records that support these activities kept up to date. The same is true of payables, because one thing you never want to see is a stack of bills to pay and then be surprised that there is no money to pay them. Of course, I don’t even need to mention payroll—your employees need to be paid on time, every time.That's Not The End
And that’s usually about where most entrepreneurs stop thinking about accounting or bookkeeping. If you are working on a new startup, you likely think; financial reports are not of major concern at this point, and all the other financial details can be handled by a yet-to-be-hired bookkeeper—BIG MISTAKE! The day you spend your first dollar on your business is the day you should have your first bookkeeping system in place…no matter how simple. In addition to needing accurate financial information to run your business; If you ever decide to sell your business, or merge it with another, the due diligence process could go all the way back to the spending of that first dollar. One thing to be aware of is that small business accounting systems do not need to be onerous. For very small businesses your system could be as simple as a few numbers jotted down in a spiral notebook, or on that sheet of paper mentioned in the "Small Business Plan" report…plus a shoebox for receipts. Of course, you can always be a little more organized than that if you want to. Also, as your business grows, the spiral notebook and shoebox accounting system will no longer suffice—that is when it is time to either outsource your bookkeeping, or bring in a part time bookkeeper. The key is that whatever system, person, or service you use, it needs to be factual, accurate, and up-to-date—and not take a lot of your valuable time away from your business. NOTE: I am not an accountant and any suggestions I make are made from the viewpoint of a business owner/CEO. My remarks deal only with the use of accountant/bookkeeper-prepared records and reports. If you have any questions regarding the technicalities of bookkeeping or accounting, please refer them to your bookkeeper or accountant.
Financial Statements
I have found that the thing most new entrepreneurs don't understand well is the standard financial information provided on their Financial Statements. If you are not clear on how financial statements are used; how they can benefit you and your business; how to get the most out of them; how others view them; and how they are created, you need to get clear as soon as possible. I can't emphasize enough, the need for you to understand your financial statements, and how they should be used. You also need to know how to analyze financial statements; what auditing financial statements means; how to build Pro forma Financial Statements; and what a Cash Flow Analysis is. These and other aspects of small business accounting knowledge are absolutely mandatory for the successful small business entrepreneur. You can start by reading each of the small business accounting reports listed in the Table of Contents below. So, following is a list of the report topics on "Small Business Accounting," with brief descriptions of each topic. Reports are linked to their own web pages, and I will continue to add reports from time to time.
List of Reports For This Section SMALL BUSINESS FINANCIAL STATEMENTS
This report discusses how the details of your small business bookkeeping system are used to develop your financial statements. UNDERSTANDING FINANCIAL STATEMENTS
It is important to visualize the events or circumstances that contributed to each part of your financial statements. SAMPLE FINANCIAL STATEMENTS
This report contains sample financial statements based on a fictitious small manufacturing company. FINANCIAL STATEMENT ANALYSIS
This report discusses how comparisons between your financial statement and your business plan, pro forma financials, prior period financials, and industry norms are important analyses. AUDITING FINANCIAL STATEMENTS
There are several levels of auditing that can be applied to your financial statements and this report presents and discusses each of these. PRO FORMA FINANCIAL STATEMENTS
This form of financial statement is often a stumbling block for the new entrepreneur. This report explains what these are, and how to prepare them. CASH FLOW ANALYSIS
Regardless of how well your financial statements tell you your small business is doing, it is cash that will determine its success or failure. This report discusses preparing and using analytical approach to monitoring your cash. SMALL BUSINESS ACCOUNTING SOFTWARE
For those of you who will insist on getting involved in the more advanced forms of bookkeeping, this report presents a brief description of small business accounting software. COMPLEMENTARY RECORDKEEPING
Every business has its own critical measurements for successful operation. Often these are far removed from your financial statements. This report discusses these issues and their importance.
Well, there you have a list of reports that can get you started on understanding small business accounting, and especially your financial statements. This is something you need to embrace in order to make your business succeed. I suggest you start by reading the first report in this Small Business Accounting Series, titled: Small Business Financial Statements
Return to Top of Page
Proceed to Small Business Financial Statements"
Return from "Small Business Accounting" to Home Page
|
