4 Accounting Topics Small Businesses Need to Care About

doing taxes

In a perfect world, every new business would keep perfect books from Day 1. But in the real world, plenty of businesses view accounting as a lower priority when they’re just trying to start up and survive. However, as a business does start to grow, the importance of accounting becomes much more apparent.

A common misconception by new business owners is that accounting is mainly to keep track of their tax obligations. While this is one component of good accounting practices, the true impact of accounting goes far beyond. Once you get past the very early stages of a business where it’s possible to keep a tally of everything in your head, proper accounting is the only way to really understand the true financial health of your business.

It’s far more common than many people realize for a business to consistently grow its revenue while failing to increase profit. The worst situations are when growing revenue actually causes a business to lose more money. Since the goal of most small businesses is to maximize net profit each year, we’re going to cover the four most relevant accounting topics:

1. Cash Flow

Out of all small businesses that fail, the majority do so because they run out of cash. Unlike VC funded companies that can afford to burn huge amounts of cash between raising rounds, most small businesses can only extend themselves so far before disaster strikes.

The good news is you can avoid this type of crunch by staying on top of your accounting. Having everything calculated means you won’t have to guess about how much cash is flowing in or out. Instead, you’ll have clear numbers that can guide your decisions.

2. Unexpected Expenses

Recurring expenses don’t tend to cause problems for businesses. Instead, issues usually arise when a large unexpected expense comes up and there isn’t a cushion to absorb it. Keeping up to date with accounting can help you build up the necessary buffer to avoid a major hit.

3. Taxes

New businesses or those that undergo sudden growth are often caught off guard by how much they owe in taxes. By staying on top of your accounting numbers, you can be sure that enough money is consistently being set aside to avoid feeling a big strain when your tax bill comes due.

4. Payroll Management

Hiring employees is an exciting milestone for any business. It’s also one that can come with some challenges. Since it can be hard to mentally calculate the full cost of new employees, having these numbers laid out in front of you will prevent your business from accidentally hiring someone it can’t actually afford.

Making accounting a priority will allow you to take far more control over the financial health of your business. If these new insights lead you to realize that bringing down your costs are a must, one place to look is your payment processor.

Not only do the rates charged by processing companies vary a lot, but so does the support and features they provide. To see what’s being offered by industry leaders, take a look at our list of the top payment processors.

Posted on Monday, August 20th, 2018