If you are a small business owner, it is essential that you follow proper accounting practices to ensure the maximum return on your investment.
Here are four ways small businesses can manage their accounting:
Use accounting software
In the past, books and records were often kept by hand, with pen and paper. Today, many businesses rely on accounting software to help them manage their finances. There are many types of accounting software to choose from—it depends on your industry, budget, and preferences. We reviewed this in our article on the best accounting software for small businesses.
Prices for popular accounting software typically range from $0 (free forever plan) to $30 per month.
Who is it best for: Small businesses (including freelancers and startups) with limited budgets are ideal candidates for accounting software.
Hire an internal accountant
If you are just starting out in business and don’t want to take on all the bookkeeping burden yourself, hiring someone else for this purpose may be ideal for your business needs. Hiring an accountant will give them access to all their systems so they can handle everything from payroll processing to tax returns without you having to worry about key issues.
According to the U.S. Bureau of Labor Statistics (BLS), the median annual salary for accountants and auditors was $77,250 as of 2021, which is more than $30,000 higher than the median annual salary for all occupations in the country. The salary of an accountant can vary depending on the location, industry and length of service.
Who is it best for: Business owners who don’t have the time or resources to do it themselves can afford to hire an in-house employee.
Leave it to an experienced tax professional or CPA
Outsourcing your projects to experienced tax professionals or CPAs is one of the best ways to ensure that your company’s accounting needs are met. They can help you with all aspects of accounting including cash flow management, business planning and budgeting, and small business tax returns.
The BLS does not publish CPA salaries separately, but its report for accountants and auditors shows that the lowest 10% earned less than $47,970 and the highest 10% earned more than $128,970. Indeed shares an average base salary of $78,947, and some others estimate that CPA salaries go up to $147,000 for managerial positions.
Who is it best for: If you are unsure of how best to handle accounting tasks such as payroll taxes or bookkeeping obligations, it is recommended that you work with a professional so that they can provide guidance based on their expertise in those areas as well as your own.
do it yourself
If you are comfortable with the numbers and the accounting process, you can try to do it yourself. You’ll want to make sure your accounting software is up-to-date and compatible with your company’s needs.
The average cost of doing your own accounting can be around $1,000 per year, given that you will incur internal costs and pay legal fees.
Who is it best for: Small business owners on a tight budget who can afford to devote time and energy to accounting issues.
If you’re ready to move up or want to start your own business, a CPA can offer invaluable guidance and help you decide how to structure your business. If cost is a major deterrent, you can utilize accounting software for your business needs.