Accounting for Small Businesses – A Beginner’s Guide

If you're a novice to the world of business accounting like me, there’s no doubt in my mind that you little to no idea about accounting for small business, however, for those of you who are new to the business world and have little to no knowledge on how to do accounting, the number one question on your mind tends to be, “How do I manage accounts and keep the books?”. Well, you’re asking the right question because a strong foundation in this area will help any business when things get a little tough.

With a lot of small to midsize businesses, there are some owners that say “I’m not good at maths.” or “I’ll check the accounts later.” And that is a sure way for a business to fail. It does not mean you need to go back to school and learn business accounting, so no reason to panic, but, it is essential to know the basic principles of accounting programs for small business, that’s exactly what this article is about.

Firstly, let's get the basics right. When we hear the terms accounting or bookkeeping, those of us who haven’t studied the subject, have no idea how to do bookkeeping. So, your first question should be “What is the difference between accounting and bookkeeping?” let’s start with the latter:

Basics of Bookkeeping to Understand Accounting for Small Business

In short, bookkeeping is a record of the sales, expenses, cash and bank transactions of the business in a general ledger. This is done on a daily basis depending on the size of your business. Here is a list of some crucial information to keep track of:

• Cash: The Cash ledger often has two parts which are Cash Receipts and Cash Payments, which are also used to complete the Cash Budget.

• Accounts Receivable: If your company allows credit accounts, then it has accounts receivable. This information is used to generate invoices to send out bills to your credit customers. 

•  Inventory: If you sell products instead of providing services, you have inventory that you must track. 

• Accounts Payable: If you buy items such as office supplies for your business and you use credit, you will have Accounts Payable. This account is also called credit, and it is what you owe your suppliers.

• Loans Payable: If you have borrowed money to make larger purchases, you must be able to track your due dates and payments.

•  Sales: You must be able to track your sales, whether credit or cash purchase. 

• Payroll Expenses: The cost of paying your employees if you have any.

•  Purchases: This includes finished goods or raw materials. It is used in the Cash Budget and in calculating the firm’s cost of goods sold on the Income Statement.

•  Owner’s Draw: This is the amount the business owner takes from the firm.

Now that we know bookkeeping basics of a business that you’re probably wondering: Let us get into the different types of accounting programs for small business.

Definition of Accounting for Small Business

In simple words, accounting programs for small businesses are the process of recording financial information of a business, which means, summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. If you’re wondering how that's done, there are two basic methods of accounting you can choose from which are ‘cash based accounting’ and ‘accrual based accounting’. When you look it up online, most sites have someone giving you this long explanation about small business accounting in terms you don’t understand, especially if you’re not an accountant, which is why I’ve decided to give you the definition in words a ‘non-accountant’ would understand. Before we get started, always remember to select an easy accounting program for small business so that you can manage it by yourself.

Types of Accounting Programs for Small Business

As a small business owner, the very first question comes to your mind now is best accounting program for small business? Well, we have listed down common accounting programs for small businesses for your reference. Here you go:-

Cash Based accounting:

By far this is the most common type of accounting programs for small businesses any small business owners opt for.

In a cash based accounting system, no entries are made in your journals or books until you receive cash in hand for a service(cash earnings include checks, credit-card receipts, or any other form of revenue from customers). This does make a difference when it comes to tax. For example, if you completed a job for a client on December 30, 2019, but you don’t get paid for it until the client inspects it on January 10, 2020, you can report those cash earnings on your 2020 tax report. When it comes to accounting for a small business, this method is one of the most popular accounting methods for small businesses.

Accrual Based Accounting:

This method is used by large multi-million dollar businesses that generate substantial revenue.

To understand accrual accounting, look at it this way: You’ve earned the revenue but haven’t been paid yet or you completed the job but haven’t been paid for it yet, however, a journal entry is made to record the revenue, this is done in large companies because they follow the ‘matching principle’ where revenue and expenses have to match at the end of the financial year.

Here’s an example of accrual accounting: A contractor who uses accrual accounting, records the revenue earned when he completes the job, even if the customer hasn’t paid the final bill yet. Remember, this particular method of accounting for a small business is popular in large organizations. If you consider this one as an easy accounting program for small business- you are free to select this way.

The same goes for expenses, for example, when a company buys material for a job, they very likely do so on credit and not they don’t actually lay out the cash for the material until a month or so later when they get the bill.

Now that you have got an understanding of accounting programs for small business- this is the time to learn about the best accounting program for small business that suits you the most.

Various Accounting Programs for Small Business

Once you establish the definition you need to decide which accounting program for small business works better for you. Again, there are numerous websites arguing the pros and cons with each method, but, according to experts, the cash based accounting method is best suited for small businesses and since this article is about small businesses accounting, let’s leave it at that.

It is important to note, you cannot switch your accounting methods in mid-way in order to find out an easy accounting program for small business, there has got to be consistency and thanks to new technology things have gotten easier to say the least.

With software like QuickBooks, you can select an accounting program for small business, and the accounting software will function based on the selected method. Bookkeeping just got a whole lot more efficient as well. You can track your cash flow, manage bills that are paid and unpaid, make payments, keep records of invoices, cash receipts, maintain separate vendor files and so much more. Imagine replacing stacks of ledgers and files with accounting software on your computer or laptop that can keep records for you without the need for bulky cabinets and spending on a workforce. It truly has put us in the future.

Now imagine a software that can take all the things mentioned above and make it even easier!

Seems too good to be true right? “Wrong” Allow me to introduce you to the SaasAnt PayTraQer and see if this is the best accounting program for small business or not?

Why use the SaasAnt PayTraQer?

Firstly, by now we have established the importance of accounting for small businesses. It is the backbone of a business and any error in accounting, however small, could cripple a business or shut it down completely. This means making sure the entries, receipts, payments, and other records are flawless.

The truth is we are human and prone to error sometimes, no matter our level of perfection. For example, you’re a family man or a woman and it’s your anniversary or your family members birthday or some other occasion that you can’t avoid, but, you’ve been so caught up with making entries in your online ledger, when suddenly you notice the date or time and realize you have got to get home or face consequences, so, you start to hurry and miss a few entries or forget about a payment, which is something that could cause a serious problem of a different kind. Ideally, we should never mess around with the accounting for a small business.

We may even put ‘work first’, however, as human beings, we are prone to distractions. The software does not have that problem.

What's more, the SaasAnt PayTraQer can take so many hours off your schedule, giving you more time to unwind or focus on other things.

You don’t even have to worry about making payments internationally. To quote the company itself “Make your bookkeeping easier and automatically sync PayPal, Stripe or Square with QuickBooks using PayTraQer for Free”.

To sum it up, this software is time saving, stress relieving, efficient and easy for bookkeeping. There can be no other way to describe it. Switching to accounting automation software of personal choice is the best accounting program for small businesses.

Lastly, you may have this question on your mind:

Do I Need an Accountant?

Unfortunately, there is no one word answer to this question without doing some research. If you’re like all small business owners, who are looking to save money, you may think you can’t afford an accountant. But not sure about the best accounting programs for small businesses- can choose automation for accounting.

Even though the SaasAnt PayTraQer is great and user friendly, a professional will be able to work it better and you can hire an accountant for your business when you really need one to check on the entries made.

In conclusion, if you’re a small business owner or just planning on starting your business, it does not have to be scary if you start it right on a strong foundation with accounting program for small business. Make sure to make the accounting for small businesses easy to manage by yourself.