Learn how effective accounting can set your small business up for success.
Accounting is the precise bookkeeping of all of your business’s financial records; this includes all sales, expenses, assets and liabilities. Effective accounting practices are essential to financial literacy for the overall success of your business.
“Accounting is a tool that opens doors to key information, provides useful insights, helps gain perspective, and aids in decision-making,” Harvard Business School Professor V.G. Narayanan states, in his Harvard Business School Online course of Financial Accounting.
The Basics of Accounting
In accounting, balance sheets are essential for you to understand your business’s financial records at any given time. When updated regularly, balance sheets will give you the information of all money coming in and going out.
Accrual accounts for revenue earned in a transactional period, rather than when it is received. This gives you an immediate idea of where your books stand. It can be complicated when identifying money you will pay or receive on a future date, such as credit sales and advanced transactions from customers.
Cash-flow accounts for all withdrawals and deposits in the bank account associated with your business. This shows the flow of cash clearly. Because it only tracks past and present transactions, it can limit the predictive value of your books, giving you little insight for future expectations and obligations.
How to Make Accounting Easier for your Small Business
There are also various software programs that make small business accounting much easier. When searching for the best fit, keep in mind that programs often target different levels of experience.
Hiring a professional accountant is also a viable option—click the link for some resources to help pick the right one.
Accounting doesn’t have to be stressful! This International Accounting Day, we celebrate all accountants, both new and experienced.