A Guide for Small to Medium Sized Business Owners
As an owner of a smaller business, you know you can't gamble with your finances. Whether you file the wrong tax form or hand a messy budget to an investor, it takes one mistake to cause financial ruin. To avoid this, consider adding an accountant to your team. What exactly is accounting and what do accountants do?
It's more than being a "money person." Read on to find out why accountants are an integral part of running a successful business.
What is Accounting?
The purpose of accounting is to maintain up-to-date financial records.
Accountants digest, organize, and interpret financial data. They're key to predicting financial success, measuring performance, and communicating financial information.
Crucial business decisions are often made from the financial information presented.
Types of Accounting
There are a few types of accounting that small and medium businesses would regularly deal with.
Financial accounting involves the recording of all transactions. These reports come in many forms that may be audited by tax authorities or stakeholders. These include profit loss statements, balance sheets, and cash flow statements.
Managerial accounting uses these same tools and processes but uses that information internally. The historical financial data will inform business decisions.
Cost accounting involves the finances around providing a service or product. It can help make predictions and analyze performance.
It's important to provide transparency for external sources. Tax authorities require even small and medium businesses to give exact financial information. Tax accounting concerns income and expenses and how they will impact your tax burden.
Businesses must report funds to the proper tax authority. These records should be clear, accurate, and provide specific information. This allows for easy compilation and summary of information.
As for nongovernmental accounting purposes, there are still industry guidelines to abide by. Financial accounting standards are the rules to follow when it comes to keeping track of your incoming and outgoing funds. Those in the U.S. use the Generally Accepted Accounting Principles (GAAP) set up by the Financial Accounting Standards Board. It provides a sense of transparency and a way to compare financial information across industries. The International Financial Reporting Standards (IFRS) are the accounting guidelines for international transactions.
Do I Need an Accountant?
How do you know if an accountant needs to be a part of your business? Will simple bookkeeping do?
Bookkeeping keeps up with everyday financial transactions. Accountants are usually certified and have a wider breadth of skills. They provide reports and inferences that are invaluable to a business.
Some businesses have an accountant as a part of their managerial team. Others may outsource to an experienced professional or accounting firm.
Find a Trusted Accountant
Accounting is an essential component of owning a business. Accountants provide sound financial decisions, adhere to legal guidelines, and allow transparency. They're trained to compile, process, and predict financial information in a way that can only benefit your business. A good accountant can help make you profitable, a great accountant can contribute to your strategy and help your company grow.
Are you looking to add a trusted accountant or advisor to your team?
Contact TYS to get the professional financial consulting your business needs to thrive!
For more on Accounting terms https://www.accounting.com/resources/basic-accounting-terms/