3 Options for Small Business Accounting
Small business accounting is all about tracking what money is coming in and what money is going out. Having a handle on your books is crucial to keep your business afloat and see where you’re at financially. And whether you should you do it yourself (DIY) or hire some professional help? It depends.
Option 1: DIY accounting
If you’re in the beginning stages of your business or are a freelancer or entrepreneur, it’s possible to do it yourself. At this stage, you may not have as many transactions and can get a jumpstart on how the financials are working in your business. Doing your own books gives you a birds-eye view of your business finances and makes planning easier. You want to track:
- Revenue
- Expenses
- Manage invoices
- Keep receipts
- File taxes
- Make estimated tax payments
Resources: You can use Quickbooks Self-Employed, Freshbooks, and Wave to help in the accounting process. As well as ComplYant to help manage your tax deadlines and budget.
Best for: Freelancers, entrepreneurs, new business owners.
Option 2: Getting a bookkeeper
A bookkeeper is a professional who organizes and manages your financial transactions. They organize records of your income and expenses, reconcile accounts, and create financial statements.
Hiring a bookkeeper can seem like a good idea but it’s not something you necessarily need right away. Going the DIY route first will help you familiarize yourself with your financials and give you clarity regarding the health of your business.
Here are few situations where hiring a bookkeeper may make sense:
- If you’re in manufacturing as there are more moving parts beyond just categorization
- If you work in construction, as project-based billing needs are complex
- If you’ve outgrown the “small business” definition and earn more than $7 million
- If payroll needs have gotten more complicated
- You’re expanding and need the support
In these scenarios, getting a bookkeeper makes sense as the accounting is more nuanced, and having a professional can help keep your books organized. A bookkeeper can take off some of the administrative burden, such as preparing 1099s, doing payroll, and keeping track of industry trends, so you can focus on your business.
Resources: You can ask people in your industry for a recommendation to find someone you can trust or check out Bench.
Best for: Businesses that are scaling or have more complex billing and payroll needs.
Option 3: Hiring an accountant/CPA
At some point, you might need extra help and want to work with an accountant. While bookkeepers help with your business’ day-to-day transactions, an accountant uses that data to review the big picture and help you in the short and long term. They will help with financial reporting, tax returns, income statements, financial forecasting, and more.
A CPA is a Certified Public Accountant, a designation with more training and authority than an accountant. A CPA can create financial statements, consult around tax issues, and even assist you if you’re audited by the IRS.
When it comes to tax time, having a CPA could be a better option than using online tax software if you have more complex tax needs, like having a business, investments, rental properties, and the like. Though a CPA will cost more, ideally a CPA will help you maximize your tax savings and keep things in order. The cost to work with a CPA can vary but in general, you shouldn’t spend more than 1 to 1.5% of your gross earnings on accounting help.
Resources: You can search for a CPA with the Association of International Certified Professional Accountants or ask for referrals in your network.
Best for: Business owners with complex tax issues, mid-level and above business owners who want financial guidance and support.
On top of these three options, ComplYant helps business owners manage tax deadlines, budgeting, and offers professional support.