Accounting in your business could be more intimidating than the prospect of owning a company. But it doesn’t have to be scary. You can perform accounting tasks for your business in no time if you know what you need to do and with a bit of help.
What is small business accounting?
Accounting for small businesses involves keeping track of, recording, and analyzing your business’s financial transactions. It converts dizzying numbers into an understandable statement about your company’s finances. Accounting services in Singapore and accountants for sole traders helps to determine the company’s health and value, allowing you to make more informed decisions for both short and long-term success.
How to keep track of your small business’s finances
Here’s how to set up your small business’s basic accounting cycle.
Step 1: Decide on a company structure.
The first item on the to-do list is deciding on a business structure. Choose wisely because your business structure will influence everything you do. There are three types of business structures to choose from:
- Sole proprietorship: A sole proprietorship bears a single owner and requires little setup, making it popular among consultants and freelancers. The disadvantage is that there is no legal distinction between you and your company, making you responsible for any debts owed by the business.
- Limited Liability Company (LLC): A limited liability company (LLC) is similar to a sole proprietorship, except that you are not responsible for any business debt. Another advantage of a Limited liability company (LLC) is that you can be the sole owner or have multiple partners, which gives you more options for filing business taxes.
- Partnership: If one is starting a business with one or more people, they can form a partnership to share ownership of the company equally. Each partner has a target role to play in the business, outlined in a partnership agreement.
Step 2: Open a bank account for your business
To control your business and personal finances separately, open a separate bank account. A business checking account and a savings account will assist you in organizing your revenue and planning for taxes at the end of the year.
Step 3: Select an accounting system.
You must first choose an accounting method for your business before you can set up a bookkeeping system. The cash vs. accrual basis of accounting are the two main methods of recording accounting transactions.
- Cash Method: The cash method is the more straightforward of the two, requiring you to record revenue and expenses as money changes hands. Cash accounting is often used by freelancers who have little or no accounting experience.
- Accrual Method: The accrual method, recommended by CPAs, recognizes revenue when it is earned and expenses occur. This method gives you a more accurate image of a business’s financial situation, and it’s more complex than using cash.
Step 4: Choose a suitable accounting software
Yes, spreadsheets or manual ledgers can help you keep track of accounting transactions, but there are so many satisfactory, affordable, and accessible accounting software solutions available?
Step 5: learn how to keep track of your earnings and expenditures.
Income and expenses will account for the majority of your financial transactions. Knowing how to deal with these two issues will help your company run smoothly.
- Keep track of all of your expenses: You must adequately record all of your business expenses to pay the correct taxes at the end of the year. In most European countries, recording business-related expenses may lower your tax bill.
- Learn how to invoice: For small business owners, the most important thing is to learn how to create an invoice. The second most important thing is to make it simple for your customers to pay their invoices. You can often include a link or QR code to online payment options directly on your invoice, making it simple for your customers to pay you.
- Make a habit of entering all financial transactions regularly: Ensure that your transactions are properly entered, whether you’re using accounting software or doing it by hand.
- Make timely payments to your vendors: Having good credit is crucial for small businesses, so you should pay your bills on time.
Step 6: Execute financial statements.
You’re ready to run your financial statements once you’ve entered all of your transactions. Begin with an unadjusted trial balance to identify any accounts that are out of balance. This also gives you the chance to make any necessary adjustments.
After that, run financial statements for the month and take some time to review them to see how your business is doing.
Top Accounting software for small businesses that work best
Aside from the essential accounting functions of general ledgers and bank reconciliation statements, some software solutions also have powerful invoicing features like automatic invoice generation that will help your business collect revenue faster. Payroll services built into accounting software include calculating employee hours, processing payroll taxes, reimbursing expenses, and direct account deposits.
They also provide simple tax solutions to keep you from having to deal with unnecessary complexities.
Accounting for a small business can be a lot easier than you think with the right software. Here are some excellent options to get you started, regardless of your situation.
1. Osome
Osome takes “the routine off your chest” by providing automated accounting, payroll, tax, and administrative service via an app and web product that combines AI software and human know-how. The company’s core offering, however, is accounting services for eCommerce business owners.
Osome has assisted in forming over 4,200 businesses and saved its clients up to 40 hours per month in administrative time. The Osome website is available in three languages for companies based in the United Kingdom, Singapore, or Hong Kong.
Pricing:
- Starter Plan: £100 a month + VAT (annually) or £120 monthly / 30 transactions.
- Booming Plan: £200 a month + VAT (annually) or £240 monthly for 100 monthly transactions
- Rocking Plan: £265 a month + VAT if billed annually or £320 monthly for 150 monthly transactions
All plans offer the following services:
- Daily bookkeeping;
- A Xero subscription;
- Corporation tax return (Form CT600);
- Companies House filing;
- Multi-currency accounting for an additional £30 a month.
2. FreshBooks
FreshBooks Accounting ensures that business decisions are based on accurate information and data. As a business owner, make sure you have enough money set aside for tax season and understand the costs of running a business.
FreshBooks was created to make it simple to keep track of income and expenses. It offers four different plans, ranging from the Lite plan for sole proprietors and start-ups to the Select Plan for larger businesses with more clients.
Pricing:
FreshBooks offers four different plan options, each with more features.
- $13.50/month for the Lite plan
- $22.50/month for the Plus plan
- $45/month for the premium plan
3. Sage Business Cloud Accounting
Sage Accounting is online accounting software that allows users to access the most important small business essentials from any location. It has features that enable cash flow, sends and tracks invoices via the cloud or a mobile app.
Cash flow forecasting is another feature that allows users to estimate future cash requirements based on past transactions.
Sage Business Cloud Accounting is designed for small businesses of all sizes, from sole traders and freelancers to start-ups, small businesses, and micro-businesses.
Pricing:
$12.00 per month. There is no free version, but Sage offers a free trial.
4. GnuCash
GnuCash is a bookkeeping and accounting program that uses a double-entry system.
Features:
- Reports, and Graphs,
- Double-Entry Accounting,
Pricing:
GnuCash is completely free.
5. Xero
Xero is a web-based accounting solution for small and growing businesses. It connects small businesses with their trusted advisors and gives them real-time visibility into their financial situation.
All bank transactions are imported and coded automatically. Online billing makes it easier to keep track of spending and stay on top of bills.
Manage your personal expenses with Xero, which allows for mobile receipt review and approval.
Pricing:
- Starter plan: $13.5/month
- Standard plan: $26/month
- Premium plan: $33.5/month
Xero also provides a free trial period.
Conclusion
Remember that the simpler the accounting process is, the more time you’ll have to focus on your business. Therefore, take a deep breath, brush up on the fundamentals, and get started right away.
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