As an entrepreneur, you wear many hats – but one of the most important is that of a financial expert. Keeping a handle on your business’s finances can be overwhelming, especially if you’re not familiar with accounting principles. Accounting for entrepreneurs can be better understood by considering three key areas. Having a solid understanding of accounting can help you make informed decisions about your business, maximize your profits, and minimize your tax liability.
Cash vs. Accrual
All entrepreneurs need to understand the difference between cash and accrual accounting. Cash accounting is straightforward – you record transactions when you receive or pay money. Accrual accounting, on the other hand, records transactions when they occur, regardless of when the payment is received or made. Both methods have their advantages and disadvantages, so it’s important to select the right method for your business.
Recordkeeping
Another important aspect of accounting is record keeping. Keeping accurate and complete records of your business transactions is essential to making informed financial decisions. This includes keeping track of expenses, income, and cash flow, as well as any loans or investments you may have. You’ll also want to keep track of any depreciation of assets, such as equipment or property. If you don’t have time to do this yourself, hire someone you trust to make regular and timely updates and establish recurring procedures.
Tax Compliance
One of the biggest challenges for small business owners is tax compliance. It’s important to keep up with changing tax laws, as well as understand which expenses are tax deductible. For example, business travel expenses, such as airfare and hotels, are deductible, but personal expenses, such as meals and entertainment, may not be. If you’re not sure, it’s best to consult with a professional accountant.
Working with Haworth & Company, Ltd.
Another way to ensure you’re keeping on top of your accounting is to work with an expert. A good accountant can help you understand your financial statements, make sure you’re keeping accurate records, and advise you on tax planning. They can also help you make decisions about which accounting method is right for your business, and advise you on how to manage your cash flow. At Haworth & Company, we partner with entrepreneurs in the Twin Cities area to provide them with tailored solutions that have the right combination of record keeping, accounting oversight and business consulting to help them make the right decisions to grow their business. Contact us to see how we can help you.
Disclaimer: This blog content is for general informational purposes only, should not be considered professional advice, and does not establish a client relationship. Haworth and Company is not liable for the accuracy of this information or the content of external links. Please use this information at your own risk, ensuring it suits your specific needs, and consult with a certified tax professional for your own personalized guidance.
