If you’re a small business owner, it’s essential that you follow proper accounting practices to ensure maximum returns for your investments.
Here are four ways small businesses can handle accounting:
Use Accounting Software
In the past, keeping track of books and records was often done manually with pen and paper. Today, a lot of businesses rely on accounting software to help them manage their finances. There are many types of accounting software available for you to choose from—it depends on your industry, budget and choice. We reviewed this in our best accounting software for small businesses article.
Pricing of popular accounting software typically ranges from $0 (free forever plan) to $30 per month.
Who it’s best for: Small businesses (including freelancers and startups) with limited budgets are ideal candidates for accounting software.
Hire an In-House Accountant
If you’re just starting out in business and don’t want to take on the full burden of bookkeeping yourself, hiring someone else for that purpose may be ideal for your business needs. Hiring an accountant will allow them access to all of their systems so they can handle everything from payroll processing to tax filings without you having to worry about key issues.
According to the U.S. Bureau of Labor Statistics (BLS), the median annual wage for accountants and auditors was $77,250 as of 2021, which is more than $30,000 higher than the annual mean wage for all occupations in the country. The pay of accountants might vary depending on location, industry and seniority.
Who it’s best for: Business owners who don’t have the time or resources to do it themselves and can afford to hire an in-house employee(s).
Outsource to an Experienced Tax Pro or CPA
Outsourcing your projects to experienced tax pros or CPAs is one of the best ways to ensure that your business’s accounting needs are being met. They can help you with all aspects of accounting including cash flow management, business planning and budgeting, and tax returns for small businesses.
CPA wages are not separately reported by the BLS but its report for Accountants and Auditors indicates that the lowest 10% made less than $47,970, and the highest 10% earned more than $128,970. Indeed shares an average base salary of $78,947 and some others estimate a CPA salary to go up to $147,000 for manager positions.
Who it’s best for: If you’re unsure about how best to handle accounting tasks such as payroll taxes or bookkeeping duties, working with a professional is recommended so that they can provide guidance based on their expertise in these areas as well as yours.
Do It Yourself
If you’re comfortable with numbers and the process of accounting, you can try to do it yourself. You’ll want to make sure that your bookkeeping software is up to date and compatible with your business’s needs.
The average cost of handling your accounting yourself may hover around $1,000 per year, considering that you’ll incur internal expenses and pay legal fees.
Who it’s best for: Small business owners on a tight budget who can afford to dedicate time and energy to accounting matters.
If you are ready to take it up a notch or want to establish your own business, a CPA can offer invaluable guidance and help you decide how to structure your business. If cost is a major deterrent, you can leverage accounting software for your business needs.