If you’re a new business owner in need of a business accountant in the Peachtree City or Marietta, Georgia area, Fricke & Associates can help you set up the accounts you’ll need to manage your finances.
When starting a small business, keeping track of expenses and revenues is essential. It is important to know where your money is coming from and where it’s going. Setting up certain accounts will allow your cash and revenue to flow freely and keep your expenses in check. Here are six essential accounts you should have to get you started:
Accounts Payable
This is the account that keeps track of all the money that you owe in the form of bills and invoices to outside vendors such as cleaning services, sanitation, pest control and laundry services. Most of your business expenses will likely fall under accounts payable. This will help you ensure you don’t pay for a vendor’s services more than once, and by checking them against your purchasing and inventory accounts, your accountant can be sure you received the goods or services you paid for. You should track and balance your accounts payable at least once a month, and if your business is growing you should consider doing it once a week. Verify each invoice for accuracy, including itemized goods or services, billing date and payment date.
Accounts Receivable
Accounts receivable keeps track of money that is owed by your clients or customers. If your business sells a product or service and doesn’t collect payment immediately, then this transaction is listed under accounts receivable. Though payment hasn’t been made, a business should record it and factor it into revenue as though it has received payment. This gives a clear picture of how much your business is earning. The downside to accounts receivable is that it doesn’t reveal how much money is actually available in your account.
Payroll
This can easily be where the biggest chunk of your expenses comes from and the one that may have the most consequences if not kept track of properly. Employees do crucial work for your business, but they’re not doing it for free. They expect to be paid on time. Not making payroll can cause employees to leave your business and bring about workplace lawsuits, both of which can significantly damage your business. Neglecting payroll can also have dire consequences during tax season, which could put your business into the crosshairs of IRS auditors.
Inventory
Product-based businesses need to keep meticulous records of stock inventory. At the end of every day, sales figures should match the number of items sold, and the number of items in your books should match the physical counts of the inventory you do by hand.
Purchasing
While your accounts payable tracks the services bought from other companies, the purchasing account tracks any material goods a business needs to operate, such as office supplies and equipment.
Cash
Cash-based accounting is most often used by small businesses and is the easiest way to record cash payments, withdrawals, and deposits. In cash-based accounting, expenses must be recorded when the cash has been received. The downside is expenses and revenues aren’t matched on a monthly basis, which could be problematic if you are looking for a loan from an independent fiancer or an investment from an investor. This is because they are looking at the end-of-the-month totals, which may not accurately reflect the amount of revenue actually available.
At Fricke & Associates, we provide bookkeeping services and small business accounting in Peachtree City and Marietta, GA. We help small business startups get off the ground by providing the financial infrastructure they need to grow and thrive. Give us a call today and let our team of experts coach you through this journey.