Lesson 12: Accounting Basics (from a non-accountant)

Navigating Small Business Accounting: A Beginner’s Guide

Welcome to the world of small business accounting! Whether you’re a freelancer, entrepreneur, or small business owner, mastering the basics of accounting is crucial for keeping your financial house in order.

Time required:  11 minutes

Let’s dive into some simple strategies that can help simplify this daunting task.

  1. Track Everything Meticulously
    Maintaining detailed records is the foundation of good accounting. This means tracking every expense, no matter how small, from office supplies to travel costs like hotels and flights. If your business requires you to be on the road, consider developing a system that works for you to manage these costs effectively while juggling the demands of travel.
  2. Use the Right Tools
    Invest in a reliable accounting software that suits your business needs. For freelancers, choose a program that can track billable hours and manage invoices. For other small businesses, look for software that allows you to attach receipts to expense items—this will be a lifesaver during tax audits. Remember, a spreadsheet might seem sufficient initially, but as your business grows, the limitations will become apparent.
  3. Separate Personal and Business Finances
    Open a dedicated business bank account. This makes it easier to manage business transactions and distinguish them from personal expenses. Using a business bank account simplifies tax preparation and gives you a clear snapshot of your business’s financial health. If you need to inject personal funds into your business, a separate account also makes tracking these transactions straightforward.
  4. Stay Prepared for Taxes
    Understanding and managing taxes is critical. Familiarize yourself with the types of taxes relevant to your business, like value-added tax (VAT) and income tax. Set reminders for tax deadlines to avoid penalties and ensure you’re not scrambling at the last minute. In some jurisdictions, you may be eligible for a small business tax exemption, which can alleviate the burden of sales tax if your revenue falls below a certain threshold.
  5. Keep Everything Organized
    An organized accounting system not only saves you time but can also save you money. When your records are disorganized, even hiring a professional can become more expensive as they’ll need to spend extra time sorting through the chaos. Make it a habit to regularly update your records and store all documents digitally when possible to reduce clutter and enhance accessibility.
  6. Set Up Automated System
    If possible, link your accounting software with your bank account. This integration can automatically import transactions into your accounting software, reducing the need for manual entry and decreasing the likelihood of errors.

Accounting might not be the most exciting part of running a business, but it’s undoubtedly one of the most important. By keeping detailed records, using the right tools, and separating your finances, you can maintain a clear view of your business’s financial status and make informed decisions. Remember, the goal of these strategies is to minimize stress and maximize your focus on growing your business.

Good luck on your entrepreneurial journey, and cheers to keeping your finances in tip-top shape!

Next Lesson: Creating & Executing your Marketing Plan

We will now bring together all public-facing aspects of your company to create a marketing plan. This includes materials you’ve produced for “the pitch”, your company branding, your website, and all social medial channels.