Small Business Accounting: How Much Of It Do You Really Need?

Entrepreneurs usually know very little about small business accounting when they launch their startup or local business. They’ve had an idea or see a problem that needs to be solved and they “go for it.”

This can, however, be a huge mistake. The only way to really judge where your business is going and therefore know how to properly “steer” it, is by following some key performance indicators (KPIs). And, without a solid accounting system in place, you’ll be flying blind.

Owners often depend on bookkeepers to take care of all their small business accounting needs. Don’t get me wrong, there are thousands of great bookkeepers who can make sure all of your financial information is properly entered into whatever software you decide to use, but you should consider bringing on a professional accountant to push your financial understanding to a higher level.

This means that there are really three components in the formula that, when blended properly, add up to successful small business accounting.

Small business accounting systems

First, you need to have an accounting system, and today this often means a cloud-based accounting system. This gives you all the convenience of the cloud along with security and backup measures that you might not have with a locally hosted accounting software system.

Second, you need to feed your system accurate information. With the cloud-based systems today, most of this is automatic. In other words, even a small business accounting system today can tie into payroll, accounts receivable, accounts payable, and more. Nonetheless, responsibility will fall on someone – or more than one person – to be sure that your system is getting all the information it needs. This may be your bookkeeper. However, it’s likely you and your team members will have responsibility in this area as well.

Going beyond the bookkeeper

The final element in small business accounting is your accountant or the firm you have engaged. While it’s true that a good bookkeeper can help you stay on track legally with regards to taxes and other reporting requirements, if you have more ambitious plans for your business, working with an accountant familiar with your industry can pay huge dividends.

For example, an accountant experienced in your industry may be able to tell you about industry-specific tax implications that a bookkeeper may not know. Further, if you engage an accountant who has a lot of experience with startups, it can be like having an experienced CFO on staff, at a fraction of the cost. You’ll also find yourself getting a solid financial education working alongside this person.

Grasp the big picture

However, to really enjoy these kinds of benefits, you need to see small business accounting in a larger context. You need to appreciate how strong financial control and understanding can help you weather the ups and downs that are certain to impact your company. When the tough times hit, it’s not necessarily the most innovative companies or the companies with the best marketing that survive, it’s the companies with the strongest financials.

If you don’t already have an accountant, start your search. Talk to others in your area and in your industry to get suggestions. Take your time interviewing candidates. Remember, you want someone who is willing to deliver more added value than merely assuring your compliance to financial regulations and tax law. Ultimately, you want your small business accountant to see himself or herself as a partner in your success.

Paying for a little more time with a smart accountant who is willing to share valuable information with you will prove to be an investment with a handsome ROI over time.