Everything You Need to Know About Accounting 101
Accounting Basics – A guide to (almost) everything you demand to know!
This week's blog post is something that I've been wanting to embrace for a while, every bit I know it'south a HUGE weight on a lot of entrepreneur's minds
What IS Accounting??
I'm not talking near the blazon of accounting you lot written report at higher. I mean specific, entrepreneurial accounting.
If you're not a 'numbers person', merely the word bookkeeping can make y'all want to run and hide. Let me clear this up: You lot Don't Need To Exist Skillful At Math To Be Adept At Accounting!
I never learned my skills at school; I learned in the trenches, running a eatery, living in entrepreneurial poverty and trying to achieve my dream.
I want to talk you through (nearly) everything you need to know virtually entrepreneurial bookkeeping, and how to brand money in your business!
What exactly does 'Accounting' mean?
Bookkeeping is actually really simple: It's how your business organisation records, organizes and understands your fiscal transactions.
A financial transaction is anything that involves your business's money:
- Deposits
- Withdrawls
- Not-greenbacks transactions (eastward.thousand. a business credit menu)
If yous were to impress out the statements for every single business concern bank account and business organisation credit carte you have, and go through the itemized listing – those are your fiscal transactions.
Bookkeeping is simply gathering that information, and organizing, analyzing and summarizing what it tells us.
How practise I do it?
Bookkeeping in your business is also known as bookkeeping .
I know that's another trigger term that can make you want to run for the hills, but trust me – y'all demand to know how to do it.
Bookkeeping is the backbone of your business finances. It's how you lot record and categorize all your financial transactions. If your bookkeeping is wrong, your financial reports will be wrong and your taxes will exist incorrect…
The illustration I like to apply for bookkeeping is organizing your closet. You start with a messy jumble of apparel, but once you lot've sorted them out, you tin come across exactly what items you own. How many pairs of jeans, how many dresses. You can hands see what y'all have an backlog of, and what you need more of.
And the feeling when you come across everything hanging neatly in your closet? Bliss!
That'due south pretty much what bookkeeping is for your business organization finances.
Basic noesis of bookkeeping and accounting is essential for your business, and my free Profit Plan tool can help yous with getting your data organized. If you've not got your copy nonetheless, make sure y'all download it now!
Let me requite yous a quick example:
You look at your business expenses and see you dropped $100 at Staples terminal month. So yous discover you also spent $200 at Office Depot.
When y'all categorize these together – as part supplies – you'll come across a pattern of how much you lot're spending on each area of your business organisation.
Why yous NEED to do your accounting
There are two principal reasons that bookkeeping and accounting are essential for a successful, assisting business:
- To figure out your taxable income (and then you lot don't finish up paying the IRS a penny more or less than yous need to)
- To make strategic decisions in your business.
If you organize and categorize all your seemingly 'random' spending, and notice that y'all spent $3000 at Staples final year – but you've no idea what you actually got – so you lot can start making strategic decisions.
Organizing your finances = Understanding your finances.
The Accounting Equation
The absolute footing of accounting in concern is this:
Business Acquirement – Business Expenses = Business organisation Profit
(Don't forget, my free Profit Programme tool will assist yous with the numbers here!)
Your business is taxed on its profits, so you lot demand to brand sure those figures are correct. Otherwise you could end upwards paying way more than than y'all demand to, or in large trouble with Uncle Sam.
I know that numbers can turn some entrepreneurs off, merely I'thou hoping and then far in this post y'all've seen that accounting just means organizing. If you can organize your closet, you can organize your finances!
The 2 Ways to Tackle Your Bookkeeping
Past at present, you should understand the importance of accounting in your modest concern. Allow's have a look at how to do it.
The starting time selection is to use accounting software . I am a huge fan of QuickBooks Online for The Chic CFO business bookkeeping, and I run through the different versions bachelor in this blog mail .
The reason I love using QuickBooks Online is because information technology allows you to hands import all your fiscal transactions and categorize them at the click of a button.
I know that learning new software might be something you don't have time for right now, then the other option is to utilize my quick and easy Know Your Numbers Now template, which yous tin can access here .
This template allows you to download your bank statements direct into the spreadsheet, and categorize each transaction quickly using a simple drop-down box. It really is a lifesaver if accounting is not your affair!
What Next?
I hope this post has gone a long style to showing you that accounting and bookkeeping aren't scary. They're non something you need to be a Math Nerd to do – or even enjoy!
I do want to make articulate, though, that as your business grows, there will exist more high-level accounting that needs to happen than I have shown you here. This is where you volition demand a tax preparer, for case.
Simply. If you've been diligent in keeping on summit of your basic financial transactions, you're going to make their lives a heck of a lot easier when y'all hand over your information. They'll be completely set up to roll!
I desire you to get into the habit of organizing your finances – of bookkeeping – weekly. Prepare a engagement in your schedule to go through your business transactions each week. The more frequently you exercise information technology, the faster you'll get at information technology.
Tracking your business concern finances gives you complete insight into what'south happening in your bank account, and your business concern. Information technology makes the obvious leap off the screen at yous, and leads to 'A Ha!' moments that pave the way for greater profits.
If you want to come across the grooming I did on this subject, you tin admission the replay now on YouTube , and if yous have whatever questions delight exercise drib me a DM on Instagram .
Yous're an entrepreneur. Yous don't shy away from a challenge. If you tin run a visitor, you can organize your finances, and I'm always hither to aid yous!
Source: https://thechiccfo.com/accounting-basics-a-guide-to-almost-everything-you-need-to-know/
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