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For Your Small Business Chris Neiger May 7, 2024

What Every American Small Business Owner Needs to Know About Accounting

Managing expenses, paying taxes, staying on top of payroll, and the overall money management required to run many small businesses will likely take more time and effort than many business owners want.

But the good news is that there are many products and services out there that make small business accounting easier than ever. If you're just starting your small business, here are three basic accounting principles you should know and some suggestions for managing your accounting needs.

1. You'll need a small business bank account

The most important first step for small business accounting is to open a small business bank account. It's crucial to keep your personal accounts separate from your business accounts for taxes, expenses, and income.

A business bank account will also help keep your personal assets from being caught up in certain tax audits, bankruptcy, or lawsuits if any of those circumstances pop up with your business.

Importantly, a business bank account can also help when you apply for a business loan or business credit card by clearly showing your business's expenses and revenue.

How to do it: Look for a bank that offers the services you want, which may include checking and savings accounts and a business credit card. Some business bank accounts will charge up to $15 to $25 per month, and others may have transaction costs. Some online business accounts may charge less, but do the research to ensure they provide the level of customer service you want.

2. Expense tracking is crucial

When starting your business, expense tracking may not seem like a big deal. How hard could it be, right?

But imagine you have employees buying supplies for your business while you and your managers use the business credit card to restock inventory. Meanwhile, payroll is due every two weeks, the rent is due each month, and unexpected expenses must be covered to keep your business running.

The point here is that there are too many expenses to track in your head. You can manage them easily while trying to run other aspects of your business. Fortunately, business expense tracking software can keep it all straight for you.

How to do it: Managing your business expenses involves finding the right software for your business. The best way to do this is to look at The Ascent's comparison of the best small business expense software and find the one that offers the services you need at the price you want to pay. The software should include a mobile up for uploading receipts, the ability to integrate credit card transactions, and the ability to set expense policy rules in the software.

3. Choose the right accounting software

Finally, one of the most essential things your small business needs to know about accounting is, unsurprisingly, to find the right accounting software.

Good accounting software will help you manage your finances by tracking invoices, paying bills, budgeting, and overall money management. This means you'll be able to zoom out and see your total revenue and expenses over the past few quarters, view projected tax liabilities, and generate financial reports about your business.

It's worth mentioning here that many small businesses wrongly assume they don't need accounting software. The temptation is to do it yourself using a spreadsheet, but there are many great accounting programs out there. Some of them are priced at just $10 per month, so there's really no excuse for avoiding accounting software.

How to do it: Find the best accounting software for your small business by considering how it will help you manage invoicing, billing, and budgeting. You'll want to find software that easily integrates with your bank and e-commerce accounts (if you have them) and helps you manage your tax liabilities.

Separating your personal and business bank accounts, tracking expenses, and using the right accounting software will go a long way toward helping you manage your small business. The sooner you start using all three, the easier it will be to manage your money and ensure that your small business is financially healthy.

Need to open a Small Business Banking account? Connect with one of our bankers.

This article was written by Chris Neiger from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.

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