Accounting is an important part of small business. It is a way to track expenses, sales, and revenue. Keeping accurate records will help when tax season comes around.
Using an accounting software system can be a great way to keep records organized. It can also help save time and money.
Profit and Loss Statement
The profit and loss statement, or P&L, is one of the 3 fundamental financial statements every business should generate. It summarizes a company’s revenue and expenses for a given period of time. The goal is to track and review net income so you can see how the business is doing.
This template allows you to calculate total business income and expenses for a customizable time frame. You can enter revenue information, including client payments and discounts, as well as business expenses such as staff wages, rent, utilities, insurance costs, and supplies. Then the template subtracts those expenses from revenue to arrive at net income.
This template helps you model a company’s profitability with charts that display total sales, cost of goods sold, operating expenses, and earnings before interest and taxes (EBIT). It also includes a chart for tracking year-to-date results.
Balance Sheet
A balance sheet gives you a snapshot of your company’s current financial status. It includes your business’s assets (cash, inventory, short-term investments, prepaid expenses and accounts receivable) as well as its liabilities (accounts payable, wages, rent, administrative costs, debt payments and more) and owner’s equity.
Your company’s assets are grouped into categories of the most easily accessible to you (cash) and the hardest to access (fixed, long-term investments like equipment). Then you write down your company’s liabilities in another column, subtracting those from your assets. What remains is your company’s net worth.
Having accurate and timely financial statements is essential for running your company smoothly. Along with your profit and loss statement and cash flow statement, a balance sheet is one of the most important documents you can create. It helps you keep an eye on your company’s long-term health and gives you a big picture view of your business. Use this simple, printable small business balance sheet template to record your company’s current worth and fill in projections to predict future financial outcomes. It also calculates common financial ratios.
Cash Flow Statement
A business’s cash flow statement shows the money that comes in and goes out over a specific period. It’s different from the income and balance sheets, which measure profitability and financial health but not the actual amount of money that has come in or gone out. For example, if you sell a lawnmower on credit and invoice your customer, the sale will appear on the income statement but not the cash flow statement until the customer pays you.
The cash flow statement also does not include prepaid expenses and inventory. These items are recorded on the income statement using accrual accounting, but only when you actually pay them. This is why it’s important to monitor your cash reserves closely and seek funding when you need it. A healthy cash flow statement can give lenders confidence in your business and make them more likely to lend you the money you need. The bottom line on the cash flow statement is the net increase or decrease in cash and cash equivalents.
Taxes
Depending on the type of business structure established, there are different types of taxes due. Some structures, like sole proprietorships, make the owner personally responsible for all company taxes while others separate tax liabilities between the business and its owners. To understand what taxes your business is responsible for, you should review IRS tax forms.
Share all documents that record your yearly expenses with your accountant, including receipts and credit card statements. A good accountant can help you save money by maximizing your deductions and credits.
You should also prepare and file quarterly payroll, sales, and income tax reports. These are typically due each April 18th, July 17th, October 31st, and January 15th. The sooner these are filed, the better. It will cut down on the hours your accountant must bill you to prepare the returns and could result in a higher refund. The simplest way to track these records is with small business accounting software. For example, Intuit QuickBooks has multiple plans, starting at less than $50/month, that allow you to send invoices, receive payments, and track expenses and income.
