Take The Fear Out Of Small Business Accounting

For newcomers to small business accounting it can be a very intimidating thing. As an Accounting Manager for many years, primarily for small businesses, I’ve learned a lot on the job. I preferred working for small to medium sized companies and the reason is that you really gain a broader knowledge of all aspects of accounting as well as the entire operations processes.

Over the years as well advancing my own education I had the privilege of training and educating many others which I enjoyed immensely.

First, you have your chart of accounts listing of general ledger accounts in which amounts can be posted. The chart of accounts is a helpful tool for identifying the best account for recording a transaction.

Usually the chart of accounts begins with the balance sheet accounts followed by the income statement account to control their position in the financial statements which also makes their lookup easier.

There are two basic financial statements. The first is your income statement and the second is your balance sheet.

The Income Statement has a simple formula. Sales - Expenses = Income.

If you were to personalize this concept this would be the money you make less what it costs you to live and you would have left your net income or savings.

Then you have your Balance Sheet formula. Assets - Liabilities = Owners’ Equity.

In this case, think of it like your home. Say your home is worth $300,000 and you owe $200,000 you would have equity of $100,000.

Whatever software you decide to use for accounting, whether it is QuickBooks, Peachtree or something else they typically start you with a canned Chart of Accounts which can be customized to whatever accounts fits your needs. Included of course are preformatted Income Statements as well as Balance Sheets.

There are also modules that track your banking transactions which when you go to reconcile your monthly bank statements looks exactly like your personal checkbook taking some of the intimidation out of it.

Of course you have a Payroll module that is available if you choose to do it yourself. You should consider that you will have to perform all of the tax filings and returns in addition to payroll processing and check printing if you do it yourself. Outsourcing may be a better option for you depending on your circumstances. Research both if you are unsure.

After years using many different software programs, I urge you to thoroughly research different options before making your purchase. Get actual user references when at all possible. Your experiences will be smooth when keeping these basics in mind. Hopefully, this eliminates or at least reduces any intimidation of accounting and its basics for you or anyone you may be trying to educate or train to work in your business.

Cash Miller is the Editor of SmallBusinessDelivered.com and hosts his own blog at www.SmallBusinessDelivered.com/cash-millers-blog.