Can I be my own accountant?

If you are considering beginning your own business, you should begin investing in the tools and resources that will make your job easier and position you for success. Part of that investment is determining which components of routine business maintenance you can undertake yourself rather than paying pricey contractors. However, there is a narrow line between what belongs under the DIY umbrella and what does not—for example, you would not want to provide legal advice. So, where does accounting fit into this discussion? Is it necessary to hire professional accountants, or can you handle some of the bookkeeping yourself?

Whether you want to manage your new small business or simply need some personal financial organization, hiring an accountant seems like a good idea. They're the tax season's magical godmothers and daddies. They'll also come in useful when you're sorting through a jumble of uncategorized receipts to do your taxes. Accountants are cool, but we can do a lot of what they do ourselves. It is beneficial to gain an awareness of the best financial practices in order to elevate accounting beyond the status of a "dismal science."

Establish a Business Bank Account

You want to separate your personal and corporate banking. This may not seem important at first, but it will save you a lot of time later on when you have more company transactions to monitor. Banks provide a variety of business accounts, some of which are meant for very tiny businesses with few or no employees.

Before going to a bank to open an account, think about your financial demands, how many transactions you'll have in a month, and compare it to what the bank would charge you. If you're a tiny business with minimal deposits or expenses, it might be worth considering a per-transaction account. Some banks provide business accounts that waive the monthly cost if you maintain a minimum amount month after month. You should also select the overdraft protection option for when you need it.

Don't get distracted during your visit with the bank representative by offers of business credit cards with rewards or other incentives aimed to entice you to sign up. You can think about them, but only if the extra fees are worth it. What you want to know is whether this bank will provide a convenient service with simple online tools at a reasonable price and whether it will be able to assist you in the future with loans or extra credit if necessary.

Create a Bookkeeping System

Are you going to use a single entry or double entry accounting system?

A Single Record Accounting systems are a type of bookkeeping service in which all of a company's financial activities are documented as a single entry in a log. This procedure is commonly used by new small firms due to its simplicity, cost-effectiveness, and lack of professional training.

A double-entry system necessitates a significantly more comprehensive bookkeeping process, with each entry corresponding to a different account. Consider the term "double-entry" to stand for "debt" and "credit." Each total's two totals must be equal. Otherwise, there is a recording error.

A double-entry method keeps accurate records and allows for the generation of accurate financial accounts. There are numerous software choices available now that make a double-entry bookkeeping system easier to handle.

Keep track of your spending

Effective and precise expense monitoring is the cornerstone of good business bookkeeping. It's a critical step that helps you to analyze your company's progress, create financial statements, keep track of deductible spending, submit tax returns, and legalize your filings.

Create a method for organizing receipts and other critical data from the start. This method can be easy and old-school (pull out the Filofax), or it can be automated using a service like Shoeboxed.

There are five types of receipts to look out for:

  • Food and entertainment A business meeting in a café or restaurant is a terrific idea; just make sure you thoroughly document it. Record who attended and the purpose of the dinner or outing on the back of the receipt.
  • Business trips out of town.
  • Vehicle-related costs. Keep track of where, when, and why you used the vehicle for business purposes, and then apply the proportion of use to vehicle-related expenses.
  • Receipts for presents When it comes to gifts like concert tickets, it counts whether the gift giver attends the event with the recipient. If they do, the cost will be classified as entertainment rather than a gift. Take note of these specifics on the receipt.
  • Receipts from the home office Similarly to vehicle expenses, you must determine how much of your home is used for business and then apply that percentage to home-related expenses.


Starting your business from home allows you to keep your overhead minimal while still qualifying for some unique tax incentives. You can deduct the percentage of your house utilized for business purposes, as well as home internet, cell phone, and transportation to and from workplaces and for business errands.


Any expense that is used for both personal and commercial purposes must be recorded. For example, if you own one cell phone, you can subtract the proportion of time you use it for business. Gas mileage is 100% deductible; simply keep all documents and keep a track of your business miles (where you're going and why you're there).

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Establish a method for handling payroll

A great number of online shops had their beginnings as one-person operations. When you've reached the stage where it makes sense to bring in outside assistance, the first thing you need to do is determine whether or not the person in question is an employee or an independent contractor.

You will be required to establish a payroll plan for your employees and check that the appropriate taxes are being withheld from their pay. There are a plethora of services available that can assist with this, and the payroll functions are included in the majority of accounting software packages.

Be sure to keep accurate records of the amounts that you pay each individual who works as a free agent.

Maintain a perfect record of everything

Once upon a time, a knowledgeable accountant remarked, "You're only as good as the records you keep." You should commit this slogan to memory and hang a letter with it above your door. Accounting's number one adversary is procrastination. The combination of a physical file and a digital file is the most effective technique to keep records. You should get yourself to the office supply store that's closest to you, where you should get a solid file cabinet, some hanging folders, some manilla envelopes, and some labels while you're there. Keep it simple. The most effective arrangement is alphabetical.


Establish a method of accounting and be consistent with it

To elaborate further on point number one, you will need to implement a system for your bookkeeping. For instance, as soon as a check is received, you should immediately make a copy of it to keep in your physical file as well as a digital file. After that, you should ensure that it is logged out and that a receipt is stapled to the invoice. Then you should deposit it, and make sure to mark the payment in your bank account appropriately so that it does not simply state "Deposit." In the future, you will most likely be unable to recall the purpose of that arbitrary deposit.


Don't just toss your receipts away; instead, organize and file them

You should scan all of your physical receipts into a digital file along with your emailed receipts in order to maintain track of all of your receipts. Receipts are available in both printed and digital formats in today's world. Sort them into categories. The following is an example of small business categories that can be altered to better suit the needs of your company.


Utilize the appropriate software

Keeping track of your finances with Excel spreadsheets might be a helpful way to stay organized; nevertheless, you should seriously consider purchasing accounting software. One of the most popular accounting software, Quickbooks, also offers a user-friendly online version. You will be able to generate useful reports with it, as well as keep track of your invoices and payments and reconcile your accounts. It provides you with a structured overview of your revenue and is an excellent resource for companies that are relatively small in scale.


Make a note on your calendar of the dates on which payments are due

Put your faith in your calendar to inform you of the dates on which you should expect to be paid, and make it a point to maintain a record of "aged" receivables that are past due. When a vendor acts puzzled about payment, you should log follow-up phone conversations and emails in writing so that you can offer evidence that you followed up with the vendor. Documents that are written down will always be on your side.


Make sure that your books are balanced on a monthly basis

The process of reconciling accounts is of the utmost significance. It is a method for ensuring that the contents of your bank account and your records are consistent with one another. Quickbooks provides a straightforward and user-friendly step-by-step approach for account reconciliation. If you wait until the end of the year to accomplish everything, keeping your accounts will be a lot more stressful than it would be if you just made sure to do this every month.


Sign up for a payroll provider that will take out your taxes and deductions on a regular basis.

A reliable payroll provider will handle all of the necessary tax deductions on your behalf if you are an employer with employees. One of the most reputable companies that can take care of all of that is ADP.


Make your profit and loss statement your best friends

It is essential for you to be able to see the overall picture of your organization if you are the owner of a corporation. A profit and loss report will detail all of the ways in which you spent money, in addition to revealing your overall income. These profit and loss statements can be compared from year to year or even from month to month to determine whether or not particular expenses are remaining the same, increasing, or decreasing according to the seasons. Here is some additional information to help you comprehend your P&L.


Be on top of your financial obligations

If your business is located in a state that imposes a sales tax, you will almost certainly be required to submit tax payments on a quarterly basis. You may also figure out if you owe any projected taxes for the quarter by looking at your profit and loss statement from the beginning of the year.


That wasn't such a terrible thing, was it? You can have more control over how things are managed if you have even a basic comprehension of the work that accountants do. We are not trying to throw accountants out of business. And hey, if you find that you enjoy it, you could always become a certified public accountant.


Put in place the protocols for collecting sales tax

Because of the rise of eCommerce, selling to customers located in other states and even other countries is now simpler than it has ever been. Despite the fact that this is a fantastic opportunity for firms who have growth objectives, it adds restrictions on sales tax that are unclear.

When a consumer makes a purchase at a traditional brick-and-mortar retail business, they are required to pay the sales tax of the state or province in which the store is located. This is the case regardless of whether the customer is a local resident or a tourist from another part of the world. When you sell things online, however, your consumers might be in completely different towns, states, provinces, or even nations than you are.


Request funding

There are various circumstances in which a developing eCommerce firm can require the assistance of other parties in the form of external business funding. This assistance could come in the form of a line of credit, investors, a small business loan, or even a business partner.

For instance, you can have an unexpected drop in sales because of factors that are beyond your control in the outside world. Alternatively, you might need a financial boost during sluggish periods in a seasonal business and find that you need it then. It is common for companies that have ambitious expansion plans to require additional money in order to make expenditures in new product development, inventory, retail shops, recruiting, and other areas.

Keep in mind that in order to obtain a loan for your small business, you will very certainly be required to present financial documents, including at the very least a balance sheet and an income statement, and potentially also a cash flow statement.

However, before you put your name on the dotted line for the debt, you need to be sure that the figures add up. Calculating the return on investment (ROI) of the loan is a smart concept, to put it another way. Calculate the sum of all the costs that the loan will need to cover, the anticipated increase in revenue that will result from the loan, and the total cost of the interest. You can determine the overall price by making use of our calculator for small business loans.


How do you go about maintaining the accounting records for a small company?

You can use a spreadsheet to build up the fundamental accounting records for a small firm. On the other hand, doing so is more laborious, fraught with opportunities for human mistakes, and time-consuming than using accounting software designed specifically for small businesses. You should, at the very least, keep track of your earnings and expenditures using a trustworthy cloud-based platform.


What is the most user-friendly software for small businesses to use for accounting purposes?

Small businesses have access to various user-friendly accounting software alternatives, from free versions to premium ones. In this collection of solutions for managing accounts for small businesses, we recommend checking out user-friendly accounting software such as Quickbooks, Freshbooks, Xero, and Zoho Books. You can also look via the Shopify App store for accounting software that will integrate without any problems with your online store.


How much do the fees for accounting for a small firm typically cost?

The costs of accounting can be extremely variable depending on the structure of your company, the requirements of your organization, the technology and tools available, and the hired professionals. Signing up for certain accounting software, such as Wave, is free of charge; but in order to use features such as payment processing, you will be required to pay a fee. Other tools may cost hundreds of dollars per month, but they often provide additional features in addition to their base functionality, such as customer support, an open API, and other company management functions.


How much does it cost for a small business to hire an accountant?

The fees charged by accountants for small businesses can vary widely depending on a variety of criteria. According to PayScale, the average hourly wage for a bookkeeper is $17.26. The costs can range from a few hundred dollars per month to thousands of dollars per month if you outsource your small business accounting needs to an external contractor or to one of the many accounting firms that are available. This is dependent, among other things, on the level of services provided and the complexity of your small business's accounting needs.


Other Things to Take Into Account When I Do My Accounting

A wide variety of responsibilities fall under an accountant's purview, but in general, they are responsible for supervising and performing work in the following areas: data management, financial analysis and consultation, financial reports, and regulatory compliance. In the previous section, we covered the fundamentals of acting as an accountant for your small business. However, as your company expands, you could discover that you need to get in touch with a certified public accountant and ask for their assistance.


The process of opening a new business can be extremely overwhelming; however, if you stick to this list, you will be able to have the finances of your new shop organized right from the start. All of these chores, from opening the appropriate bank account to calculating how much money you will make off each product, will contribute to your firm's success, both now and as it expands in the future.


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