Accounting Basics for New Small Business Owners

Chances are, you didn’t start your business for love of accounting and bookkeeping tasks. Rather, you likely started your business because you have a passion, you’re really good at something, or you want to make a difference in the world; you’re probably really good at it! There’s just the pesky accounting side you might not have considered.

While it’s not necessarily glamorous or your favorite part of owning a business, bookkeeping is important. At the very least, all new small business owners should have a basic understanding of bookkeeping and accounting terms and principals as you start out.

Use this list to help you understand accounting basics for new small business owners:

• Cash: This might be obvious, but we’re starting at the very beginning! All business transactions pass through your cash account and record should be kept of incoming and outgoing cash. Save your receipts and copies of your invoices to help you reconcile your cash accounts.
  

• Inventory: The product your company has in-stock to later sell is called your inventory. You should keep records of your inventory in your books, as well as periodic physical checks to make sure your books match your shelves. This will help you keep track of what you have and what you need to order.
  

• Accounts Receivable: If your business sells products or services, but doesn’t necessarily receive cash for payment immediately, such as you invoice a homeowner for a repair in which they are to pay in the next month, this is called a “receivable” and you must track them. Keeping this record up-to-date is critical to know who owes your business so you can keep an eye on your cash flow and who is delinquent in payment in order to follow up with them.
  

• Accounts Payable: Accounts payable refers to the money your business owes others. This could be for purchased goods or services your business used. Keeping track of this helps keep your business square and on time for payments; it also helps you know what’s coming and going.
  

• Loans Payable: Similar to your accounts payable, loans payable are the business loans you have taken out for equipment or startup costs. These loans and their associated payments should be tracked.
  

• Sales: Potentially another obvious addition to this list, but important nonetheless. Sales refers to the goods or services your business has been paid for by customers. Keeping track of sales allows you to see where your business stands and if your marketing efforts are working.
  

• Payroll Expenses: This line-item details the amount of money your business must pay out for the salary of your staff and yourself. Payroll must be deducted from the overall cash of the business and must accounted for each month.

Business accounting is an important part of any business - no matter how big or small, young or old. Read the Tally Services blog to learn more about important accounting practices, tax information, and business management tips. If you’re feeling overwhelmed by the accounting and bookkeeping side of your business, don’t hesitate to contact us. We’re your partner in bookkeeping and accounting services in Fort Collins, CO. We’ll meet you where you are and find creative solutions that work for you and your business.