- 1 Small Business Accounting – Matt Oliver’s Hidden Secret
- 2 Reasons You Should Have Bookkeeping
- 2.1 Besides meeting customer needs, every business has a goal to make a profit.
- 2.2 Bookkeeping will be very helpful in your financial planning.
- 2.3 Assist in mapping your business targets.
- 2.4 Your mind becomes more calm and peaceful.
- 2.5 It helps you to comply with government policies.
- 2.6 Bookkeeping itself is educational.
- 3 Requirements Related to Successful Bookkeeping for Your Small Business
- 4 Revealing Two Types of Bookkeeping
- 5 The Main Things to Record in Your Books for Tax Payment
- 6 Accounting Book Update Time
- 7 The Basic Concepts Applied in Small Business Bookkeeping
- 8 Enforcing Systematized and Neat Records
- 9 How to Avoid Bookkeeping Errors?
- 10 Final Thoughts on Small Business Accounting Matt Oliver’s Hidden Secrets
Small Business Accounting – Matt Oliver’s Hidden Secret
Bookkeeping for small businesses is often considered optional. But every company, from small-to-medium sized companies to large corporations and parastatals, needs neat accounting to get a clear sustainable profit.
In addition, of course, in this case, reliable accounting assistance also needs to ensure the flow of expenses and income per year for your business finances.
Bookkeeping may seem expensive for small companies. Owners should hire qualified employees if they are not familiar with accounting bookkeeping. Apart from that, it is also quite time-consuming. Today, we’ll cover the key secrets to efficiently managing the accounting books for your small business or you can tell right away when to hire an accountant.
Reasons You Should Have Bookkeeping
Besides meeting customer needs, every business has a goal to make a profit.
This is where bookkeepers act as a second boss helping you achieve your company’s financial goals. For example, when you are going to reconcile a bank account by comparing your records with what your operational bank has recorded.
Bookkeeping will be very helpful in your financial planning.
What you need, of course, is to maximize profits and minimize expenses. Having a monetary roadmap helps in planning current and future expenses for your company. By understanding cash flows that depend on the dominant factors, internal or external conditions.
Assist in mapping your business targets.
When you know the hidden secrets of bookkeeping, you can efficiently plan your desired target. So you can get there at the end of the day because you know what to include and exclude.
Your mind becomes more calm and peaceful.
Failure to have organized accounting for a business is catastrophic. By keeping the books, you don’t have to cram the sound of information in your head. It can also help you in calculating the taxes you have to pay. You’ll have enough time to concentrate on other issues that make your business grow beyond imagination.
It helps you to comply with government policies.
The government always puts policies that are beneficial for them to carry out their functions optimally. Today, the world is changing day and night because of technology. So you need to keep digital accounting to comply with the law, and most importantly to minimize cash outflows.
Bookkeeping itself is educational.
The market structure is not static and only fixes one product. Because the latest products and services will always enter the market. Hence, by taking care of your books, you are knowledgeable to deal with common factors that might interfere with your performance. For example, it helps in determining the maximum cost you can incur for a particular product.
Requirements Related to Successful Bookkeeping for Your Small Business
The hidden secret of bookkeeping starts with understanding simple terms you may not know but are important principles. Accounting is not a one-day activity like buying a product from a manufacturer and waiting several months before doing it again. It is better if you are familiar with the following terms:
Statement of financial condition (balance sheet)
A balance sheet is a financial tool that will determine the ‘health’ status of your business. For small businesses, you can do it monthly or at any other time interval chosen for your trade (must be more than one month). You can do that after a year or any chosen time frame for more significant companies.
The balance sheet will help you evaluate the total assets for your business, liabilities, savings, and funds from outside sources (loans) that sustain your operations. To ensure this, you can use Generally Accepted Accounting Principles (GAAP), where if liabilities and assets are equal, it indicates that your small business is doing well. However, if your liabilities outweigh your assets, you should minimize your credit or spending to be on the safe side.
This is the most important must-have book for doing business. Bookkeeping contains all the information you need at any time of the day. Any expenses or income received are recorded here for future use. It gives you a practical way to store user information and therefore offers peace of mind. You only need to refer back if one is in need.
For recording your business, you can use a general ledger. Or you can also apply modern technology by using computers that store large amounts of information that can retrieve if something goes wrong.
Expenditures, Revenues, and Capital
An expense is any activity that takes money out of a business. Successful expenses should not exceed income. Therefore, before starting your business, it is mandatory to estimate everything you need. The most appropriate way is to make a business plan.
Revenue or income is the determinant of the ‘life’ of a business. Bookkeeping will help you to know the income received from each investment in the commercial. If you fail to hold on to it, you may trick into making a profit, but this will become apparent when the liabilities outweigh the assets.
Capital investment must be used wisely so that your business can achieve its goals. For better results, you should understand what to include (to be discussed later) while determining income helps you as an entrepreneur know the welfare of the business.
Revealing Two Types of Bookkeeping
The article reveals all the hidden secrets that you have to pay dearly for useful results. There are two types of accounting that you should understand to measure yourself in your business operations. This will help you in evaluating which can work for you efficiently.
This accounting principle says that cash ‘wins’ instead of being received from the client. For example, if a potential buyer signs a contract with you without even paying, it is said that you have ‘won’ the customer. This type of bookkeeping may not be suitable for small businesses, and it is recommended to use the second type
This bookkeeper says that the document only records the income and cash disbursements issued. It is the best accounting for small businesses in town, and most importantly, helps to avoid losses.
The Main Things to Record in Your Books for Tax Payment
If you are new to the business, this article brings to light some important documents to help you keep track of the daily transactions that you need to keep in your accounting books. These documents are important in making critical rationale in business evaluation, especially tax payment, and what it includes.
- Payment Proof
- Procedure W2 and 1099
- Financial statements from your bank or records
- Reports from credit cards and banks
Accounting Book Update Time
Updating the books is very important for small businesses to keep track of all activity. It is invaluable as a revealed secret to prosperity. There are two critical times to update a book depending on the period you choose. You should not collect too many records when choosing a time before transferring them to the final bookkeeping.
This is the best period if you are running a small business. Doing weekly bookkeeping minimizes the strenuous work if you haven’t hired additional personnel to do the work. Moreover, it takes less time due to minimal transaction accumulation, and besides, it is also economical.
Be sure to record information that is easy for even third parties to understand. Although it remains confidential because it is private unless required by the authorities. Proper record-keeping also helps to easily calculate the tax payable.
You can do monthly logs to track business performance. This will tell whether you are making progress or regressing. Also, consolidate with banks to find out which transactions may not have been updated on their part.
The Basic Concepts Applied in Small Business Bookkeeping
Every successful business has certain rules that apply. It aims to ensure that all targets on that day are achieved as expected. These concepts help you manage your small business account without any pressure or hesitation.
This law helps you keep track of your every transaction. Even small transactions may not be so significant but are necessary when setting up a loss and profit account. These concepts include:
- Accounting equation. This concept declares that you will debit all assets and credit liabilities including capital according to the amount transacted. It is written as: Assets = Liabilities + Equity.
- Accounting period. It declares the time frame that the transaction is ready for viewing.
- Conservation Concept. This is an important law that makes you think about spending so much. Therefore, you are looking for ways to minimize cash outflows. So it’s important to account for all expenses first and not income until you receive them.
- Accrual Concept. It is very important to preserve the credits and debits of an organized commercial. You should record your capital, liabilities, and assets to represent professionalism for easy tracking.
- The Concept of Concern. This law declares that you must commit to one line of business even if you are not financially strong. This will assist you in learning how to overcome future challenges.
- Matched Concept. The concept is clear that each entry must be recorded with the date the response was created. It makes it easy to keep track of all transactions. Apart from that, add what caused the effect and result under the same info.
- Economic Entity Concept. The concept declares that you must distinguish between expenses and income and profits for easy evaluation.
- Consistency Concept. It says that you must adhere to one system of recording your transactions. Because any changes made can result in huge losses.
- Materiality Concept. The concept dictates that you should record even small transactions like buying a pencil. By doing this you will get a real reflection of business performance that you can rely on when making decisions.
Enforcing Systematized and Neat Records
The success of a business depends on how well transactions are managed and recorded. Neat notes will be easy to trace and will avoid errors associated with incorrect readings, such as:
- The original entry principle where the transaction is made on the wrong account
- Errors of negligence where all transactions are not considered in the books
- Commission errors occur when you misread transactions which may occur if your records are untidy and disorganized.
- Duplication error. In scenarios where the person in charge of recordkeeping changes, duplication may occur if the new person cannot view transactions properly because they are not organized.
- Reverse entry error. Failure to record properly can result in this error where one fails to recognize between business expenses and revenues.
Unfortunately, this error will result in misinformation that can stop business. Additionally, problems such as delayed payments, failure to detect fraud, increased or incorrect cash outflows, and error fees may occur.
In today’s world, you have to minimize stress and focus on the activities you need to get done. It is only done when you organize your work properly. As a result, you can use a personal journal or account book to make this easier.
How to Avoid Bookkeeping Errors?
It provides stable financial protection to avoid a possible monetary crisis. Here are some practical steps to prevent accounting errors for your business:
Apply Current Accounting Methods
Leverage technology to get the best results for your business operations. Purchase the latest software and I-cloud to keep your information safe. choose one that can update itself automatically, unlike the desktop, which requires manual procedures.
Check Budget and Expenditure Periodically
It is very important to have financial statements that are updated to prevent assumptions but can be seen with facts. A budget also helps you plan how to spend money on each product or service.
Hire Skilled Personnel Who Understand Data Entry
Accounting is all about accuracy and speed. It would be better if there is an individual who is key to every detail to provide reliable information in running the business. Especially someone who can answer a few questions if they arise.
Frequently perform Quality Account Analysis
Reviewing accounts helps you have information that describes the actual expenses and income of the business. It also helps in knowing the financial status of the company if it can pay all obligations
Distinguish between Business and Personal Capital
This may sound like an easy task to tackle, but failure to segregate funds leads to entrepreneurial failure. Your business must have separate accounts to store financial transactions. Similarly, personal finance should also follow the same path. By going through this, you will feel the positive impact and avoid confusion.
Final Thoughts on Small Business Accounting Matt Oliver’s Hidden Secrets
Small businesses are vulnerable to financial crises if there is no proper corporate accounting. After going through the article, you can apply the basic concepts discussed above. However, you need to consider the business structure before choosing which idea to use.
Making a profit should be your top priority in finance every year. It doesn’t matter what the dominant factor can affect the trading operation. You should make sure to deal with accounting errors carefully as stated above, to have a fruitful business adventure.
If you can’t handle the books yourself, make sure you hire reliable and skilled personnel to carry out the show. Also, apply modern accounting to avoid problems associated with outdated or manual bookkeeping.