Do Small Businesses Need Accounting?
If you own a small business, you know that many decisions you make will affect how successful your business is and how much money it will make. One of those decisions is the types of accounting services to use. These services are auditing, cost accounting, financial accounting, forensic accounting, tax services, management accounting, and payroll processing. Keeping these services in mind will help you decide whether to use small business accounting software or an accountant for all your accounting needs. Considering the cost and what you’ll get from each service will also help you decide which to use.
Do Small Businesses Need Accounting?
Yes, small businesses need an accounting method. Accounting is important to small business owners because it allows them to track all financial transactions within the business. This, in turn, allows for evaluation of performance so that changes can be made, if needed, to further grow the business. Monitoring financial transactions protects small businesses from possible theft and fraud within the business. Understanding the business’s costs and profits also allows for better planning on future spending and prepares you for audits.
So what accounting does a small business need exactly? To have the most reliable accounting possible, a small business owner should:
- Open a bank account specifically for business income
- Track expenses
- Develop a bookkeeping system
- Set up a payroll system if they have employees
- Look into any import taxes they may have to pay due to importing goods from another country
- Set up a way to accept payments for their business
- Determine sales tax if they plan to sell goods or services online
- Look into their tax obligations
- Determine how to increase gross income
- Apply for funding if needed
It sounds like a lot, doesn’t it? Let’s look into how manageable doing your own accounting for your small business truly is.
Can I Do My Own Small Business Accounting?
Yes, you can. However, you may not want to. As a small business owner, you can do your own accounting and, in most cases, save money doing so, but with everything that goes into running a small business, you might not have the time or necessary knowledge to do your own accounting.
According to a SCORE report, 40% of small business owners say bookkeeping and taxes are the worst part of owning a small business. While small business accounting software can be useful in tracking expenses, that software will not be able to tell you if you missed inputting expenses to deduct from your income. Tax errors and poor audits also pose a greater risk for those who decide to do their own accounting. We haven’t accounted for the time it takes to complete all those accounting tasks yet, either.
That same SCORE report found that the majority of small business owners spend more than 41 hours a year on taxes, payroll, working with accountants, and other financial obligations. If you are a freelancer, have a simple tax situation, or view your business as a hobby, then your finances are probably straightforward and not too much of a headache to do on your own. Otherwise, you might want to consider hiring an accountant.
What Does an Accountant Do for a Small Business?
Accountants help with a variety of a small business’s financial tasks, including assisting with the creation of a business plan, advising on a business’s entity structure, assisting in acquiring all appropriate licenses, and setting up bookkeeping software. They also help with determining sales tax, payroll, financial reporting requirements, tax planning, audit assistance, and growing your business. How much an accountant helps your small business depends on how much of their involvement in your business you want.
Accounting firms like Delta Wealth Advisors offer accounting, tax, and consulting services from CPAs, as well as advice when new challenges and opportunities arise. They also offer monthly and quarterly bookkeeping services, invoicing, bill-paying, and payroll preparation services to give you back some of the time you would normally spend on those tasks.
How Much Does an Accountant Cost for a Small Business?
According to a SCORE report, the majority of small business owners spend up to $5,000 on accounting services. While hiring an accountant can be more expensive than buying accounting software, it’s worth considering when you account for the time you’ll get back and the accuracy of your financial records.
Delta Wealth Advisors—Your Small Business Accounting Partner
Your small business is important to you, so your business’s finances should be, too. If you feel that those finances will add too much to your plate, or if you think your finances are complicated enough where mistakes are more likely to be made, then you should consider hiring an accountant, at least for your big financial tasks. If you are interested in learning more about what accounting options are available to you, reach out to Delta Wealth Advisors for more information.