Accounting: A Beginners Guide for Small Business Owners

chicago accounting firmThe words ‘small’ and ‘business’, when used together in a sentence, can be deceiving. The reason for this lies in the fact that the word ‘small’ often procures an image of simplicity. In other words, a small business is one that can be managed easier than something on the ‘big’ end of the spectrum. Stating that small businesses are easier to run than larger ones, is fallacy. Sure, the mom and pop grocery store on the corner may be small when viewed in terms of square footage. But when you don’t have a room full of specialists with advanced degrees helping you, running any sort of money making venture is challenging.
Here are a few tips and tricks that we can offer in order to ensure that one ‘small’ part of your deceptively complex business is handled properly. CPAs can make a world of difference especially when tax season rolls around, when you apply for a loan, or when you get a letter informing you of an impending audit.
1.) Tracking Records: Hard working entrepreneurs often overlook the importance of maintaining proper records. An in-house accountant is one surefire way to properly handle your records. But most outside accounting firms can handle your needs at a fraction of the cost of even a part-time, in-house accountant. Bank statements, monthly credit card statements, payroll, petty cash receipts, and other records of your transactions must be maintained and stored properly. When your company takes the necessary steps towards hiring a CPA to oversee the operation’s monetary flows, having these items handy and suitably organized will save you fees and difficult to find time.
2.) Keeping the Books: We at Accounting Solutions Ltd. (773-267-7500) recommend hiring licensed accountants rather than trying to keep the books yourself. No piece of software will ever turn you into a CPA or an Enrolled Agent. You just don’t know what is deductible or how to properly balance a Balance Sheet. Most business owners cannot even balance their checkbook let alone handle the complexities of entity accounting. Doing your own bookkeeping and taxes could put your ability to breathe free air in jeopardy. The IRS doesn’t play games.
3.) Tracking Inventory: This tip is case specific for those business owners that actually carry a raw materials or finished goods inventory. Keeping an eye on your inventory is perhaps one of the most essential aspects of managing any retail, distribution, repair, or manufacturing business. Its just too easy for all of your profits to “vanish” out the back door. If your inventory doesn’t “turn” properly, you’ll never turn a profit.
Virtual inventories do not work. In all our years of practice, we have never seen a virtual inventory that was accurate. The very nature of inventory does not lend itself to a virtual atmosphere. Inventory spoils, becomes obsolete, shrinks, and can be cannibalized for parts. There are two principle ways of handling this: by doing a monthly or bi-weekly inventory that counts the remaining items on the shelf, or by having arbitrary inventory checks that are organized depending on the lay out of your establishment. No matter how you do it, remain diligent. When there is a problem, and there is always a problem, you need to catch it early. We have seen too many Chicago businesses lose considerable profits due to a lack of inventory controls.
So there they are. Just a few tips that we at Accounting Solutions Ltd. (773-267-7500) can offer to ensure that you can control your accounting. As stated previously, we strongly endorse hiring a CPA to manage your finances, particularly as your enterprise expands and grows. Please contact us for a complimentary 60 Minute Consultation.