You may have been able to keep up with everything when you first launched your small business, including bookkeeping and accounting paperwork. As your business grew, you just didn’t have the time to get to it quite as consistently. Now you have reached the point of considering outsourcing your accounting paperwork to a company like Doerhoff & Associates CPA. Regardless of what you ultimately decide regarding accounting functions for your business, it’s a good idea to have a basic understanding of how business accounting works.
Sales or Money In
No matter what line of business you’re in, your company deals with sales (money in), expenses (money out), purchases and the inventory cycle, and liabilities. We will start with focusing on your company’s sales or money in, which consists of both cash and credit sales.
In this instance, cash means any sale where you received payment at the same time you provided the customer with goods or services. It doesn’t matter if the customer paid in cash, wrote a check, or paid with a debit or credit card. A credit sale is one in which the customer receives the goods or services today, but makes a payment later. If you fail to keep track of accounting paperwork with credit sales, you could miss billing customers and lose income.
Expenses or Money Out
As a small business owner, you know that spending money is necessary if you hope to make any. Typically, your expenses will fall into the category of recurring or non-recurring. The latter describes expenses that you didn’t anticipate. Repairing the roof of your commercial building after a storm is an example of a non-recurring expense.
To stay organized, consider signing up for direct debit of your recurring expenses from a business checking or credit card, if the company billing you allows it. It will also be necessary to organize your accounts payable statements to avoid missing due dates and incurring late fees.
The Purchase and Inventory Cycle
Business owners who sell products must track the date and cost of purchases, as well as take regular inventory to know how much supply they have on hand. To make this process as efficient as possible, be sure to create a purchase order in-house and forward to the company selling you the products. Additionally, don’t forget to count everything in a supplier’s order when it arrives in your warehouse and create accounting paperwork to ensure prompt payment of the invoice due.
A liability for your business falls into a different category than an expense does. For example, the cost of obtaining heat for your business is an expense, while a long-term loan is a liability. A liability follows you even if you close your business. It’s essential to track your liabilities to get an accurate sense of whether your business is truly profitable.
The above categories are only the beginning when it comes to business accounting. We invite you to contact us to request a consultation session to learn more about outsourcing your accounting paperwork. Doerhoff & Associates CPA is pleased to be a QuickBooks Pro Advisor member.