Whether you’re an experienced business owner or an entrepreneur getting your first business off the ground, navigating the financial side of things can be tough. If you don’t understand accounting well, there’s a real risk that your business’s finances could be mismanaged, leading to all sorts of issues.
In this article, we’ll explore the basics of business accounting and explain why it’s important for every business to seek professional advice.
As leaders in finance and wealth creation, the team at Curve Accountants is well-placed to provide expert business accounting advice. We specialise in small businesses, as well as those within the medical, dental, allied health, and veterinary industries. Contact us today to learn more.
What is Business Accounting?
This refers to the recording, summarising, analysing, and reporting of a business’s financial transactions (including assets, equity, expenses, income, and liabilities) to key stakeholders within the business, as well as tax collection entities and oversight regulators.
Typically, only smaller businesses require business accounting, and it will be conducted either in-house or through an accounting firm (depending on the size and needs of the business).
Functions of Business Accounting
While the role of business accounting is varied depending on the business, some of its functions may include:
- Budgeting and Planning – Accounting provides historical data, which can be used to forecast future performance. This enables businesses to plan, allocate resources, and determine financial targets.
- Cash Flow Management – The inflow and outflow of cash is monitored, which helps to ensure that your business is liquid enough to meet its short-term obligations (such as bills and payroll).
- Decision Making – It provides insights into cash flow, profitability, and financial health that are essential for making business decisions (regarding budget allocation, investments, and cost-cutting measures).
- Financial Reporting – This includes the preparation and presentation of financial statements, which offer an overview of a business’s financial condition and performance.
- Performance Evaluation – Accounting tracks costs, revenue, profitability, and the use of resources, which enables stakeholders to evaluate the business’s performance over specific periods.
- Regulatory Compliance – There are specific regulations and standards that a business must meet; accounting helps to ensure that your financial reporting complies with relevant legislation.
- Taxation – Accounting allows stakeholders to better understand their tax liabilities, claim eligible deductions, and ensure tax compliance via accurate calculations and timely tax payments.
Related link: Cash Flow Assistance for Businesses
Why is Business Accounting Important?
Business accounting is critical for many reasons. It’s essential for helping a business to meet its legal requirements (such as tax obligations) and it allows key stakeholders to make better-informed decisions regarding business operations (such as forecasting and setting long-term financial goals). Overall, it’s vital for the transparency and success of a business.
Can I Do My Own Business Accounting?
Many small business owners choose to handle their finances in the beginning so that they have money for other business expenses. There’s no issue with this, provided you have a solid understanding of basic accounting principles (and potentially the aid of accounting software).
As your business grows, however, you may find that accounting becomes more challenging and time-consuming. You may lack knowledge of how to perform certain tasks. When this occurs, it’s beneficial to engage the services of a professional accountant in Melbourne to help keep your business on track.
Tips for Small Business Accounting
Even if you’ve sought assistance from a certified accountant, there are many things that you can do as a small business owner to make business accounting easier:
- Keep your personal and business expenses separate. This will make tax preparation easier and will provide a more accurate picture of your business’s financial health.
- Update your financial records regularly to ensure that they’re accurate. This will help in tracking your business’s progress and making business decisions, as well as simplify your tax filings.
- Anticipate significant expenses (such as insurance payments) and ensure that you budget accordingly. Plan for any purchases (such as equipment) to avoid putting your business under financial strain.
- Invest in some accounting software (such as Xero). As well as saving time by automating certain tasks, this will help you to reduce errors and generate accurate financial reports.
Invest in Your Business with Curve Accountants
Understanding the nuances and complexities of business accounting is not something that comes easily or naturally to most people, which is why having a great accountant on your side is a must. We’re invested in you at Curve Accountants, which is why we take a comprehensive approach that goes beyond tax compliance and business accounting. We want to help you succeed, which is why we offer advice tailored to your unique situation.
