If you are a small business owner then you must know how important accounting is to a business, whether it be small or big. Accounting has often been termed the heart of a business however; it can be a difficult task to handle all the finances of the company. Small Business Accounting Hidden Secrets Medium Matt Oliver is really important for small enterprise businesses to understand all the accounting functions. Being updated and knowing all about the financial situation of your money means knowing what your business is making, how your money is being spent or utilized, and how much money you are losing.
Read this article to understand the small business accounting secrets that will help you handle the accounting and make your business grow. The first thing you need to understand before moving on to the accounting secrets is to learn all the common accounting terms and concepts such as:
- Bookkeeping: Bookkeeping is the process of keeping a record of all your financial functions. This financial information will prove to be of great help to you in the future. although bookkeeping used to be traditional, now the newer methods have taken its place with software like QuickBooks and Excel easily available for bookkeeping.
- Balance Sheet: The Balance Sheet is a document that contains all your assets, be it current assets like saving accounts or other assets such as loans and receivables. The balance sheet is prepared monthly, quarterly or yearly to have an idea about the company’s financial situation at the exact moment.
- Capital: The amount of money used to start a business is called capital. It can either be invested by the owner, it can be a bank loan or it can be sourced for some other person. It is utilized to initiate business operations.
- Accrual-based Accounting: In this type of accounting, the payment a company is supposed to acquire by a contract is termed as ‘won’, even if it has not yet been received. The transactions are recorded and it helps in gaining a long-term visual representation of the company. A good example of this method is credit cash transactions.
- Cash-based Accounting: This method records the income and expenditures directly once the money has actually been transferred. It involves direct cash rather than credit. This method is more commonly used.
After you have gained some knowledge regarding the basic terms and concepts that are necessary to understand the accounting function, you will start having an idea about what strategies you can make for your business or which type of accounting would be more suitable for your business. You can also take help and referrals from accounting professionals for developing financial strategies for your business. Now, if we talk about the Small Business Accounting Hidden Secrets medium by Matt Oliver, it has 9 fundamental concepts for managing the business accounting including:
The first step to managing business accounting is the accruals that are an integral part of accounting. Accruals mean examining the company’s debts and credits in detail. Accruals include all the information on the assets, capital, and liabilities of the business. Everything in accruals is well-maintained and accurate.
Consistency is the key to any form of success and the same goes with a small enterprise, this is why it is one of the most important methods in accounting. Choose an accounting method and then stick to it to achieve success rather than changing it after every while.
3. Going Concerned:
This means sticking to your business or staying with your current employer even if the business is not growing. Any business requires some time to develop and become successful so, if your business is currently going through financial instability, do not switch and keep on working hard to get through the storm.
This method is also an important one and can help out small businesses efficiently. Conservation in accounting means that you pay attention to your expenses first. Record the expenses in your book but do not record the profit until you actually acquire it. This way you will be able to pay more attention to decreasing your expenses and focus later on the profits that you have made.
5. Economic Entity:
As a small business owner who is just starting out, you might be phased by the profit created by the business but this can easily turn disastrous so, make sure you keep your income and the company’s profit separate. Do not ever involve the two together and always keep your personal expenses and income separate from the business earnings.
Materiality teaches you to keep an account of every transaction your company makes. Even if you think the transaction is small and ineffective, do not miss out on recording any transaction and updating regularly. A lot of applications are available in the market that will do this job for you accurately and take away the weight from your shoulders.
Just like materiality, you should record all your transaction in this method as well but in matching, you are also expected to write down the cause and effect of each transaction. This will help you analyze the relationship between your expenses and revenue and you will be able to make better financial decisions.
8. Accounting Equation:
The fundamental accounting equation, also known as the balance sheet equation is “A= L+E”. this equation is used to understand the relationship between assets, liability, and equity. Keep your accounting book updated by using this formula to keep a record of your transactions.
9. Accounting Period:
The period when the transitions are documented is called the Accounting Period. All the financial statements and documentation will be prepared according to that specified period and you will only have to record the transactions that are relevant for reviewing at that given time. Accounting periods differ from company to company, one of the most common is monthly accounting periods.
So, these are the basic concepts covered in the book “Small Business Accounting Hidden Secrets Medium Matt Oliver” and they are really beneficial for anyone starting out their own business or looking to level up their existing business. The book contains some very helpful business accounting tips and strategies that will help you take your business growth to the next level and you will be able to achieve your defined business goals successfully.