If you're a small business owner, it's essential to follow proper accounting practices to ensure the greatest return on your investment.
Here are four ways that small businesses handle their accounting:
Use accounting software
In the past, keeping books and records was often done manually with pen and paper, but today many businesses turn to accounting software to manage their finances. Depending on your industry, budget, and preferences, there are many different types of accounting software to choose from, which we reviewed in our article on the best accounting software for small businesses.
Prices for popular accounting software typically range from $0 (forever free plan) to $30 per month.
Ideal for: Small businesses (including freelancers and startups) on a tight budget are a great fit for accounting software.
Hire an in-house accountant
If you're just starting out in business and don't want to shoulder the bookkeeping burden all by yourself, hiring someone else for that purpose may best suit your business needs. Hiring an accountant means your accountant will have access to all of your systems so they can handle everything from payroll to tax returns, so you don't have to worry about important issues.
According to the U.S. Bureau of Labor Statistics (BLS), the median annual salary for accountants and auditors was $77,250 as of 2021, more than $30,000 higher than the national average annual salary for all occupations. Accountant salaries can vary depending on location, industry, and years of experience.
Ideal for: Business owners who don’t have the time or resources to do it themselves and can afford to hire an in-house employee.
Outsource to an experienced tax accountant or CPA
Outsourcing your project to an experienced tax accountant or CPA is one of the best ways to ensure your business' accounting needs are met. They can assist you with all aspects of accounting, including cash flow management, business planning and budgeting, and small business tax filings.
CPA salaries are not reported separately by the BLS, but the report on accountants and auditors states that the lowest 10 percent earn less than $47,970, while the highest 10 percent earn more than $128,970. Indeed puts the average base salary at $78,947, and several other studies estimate that CPA salaries in management positions can be as high as $147,000.
Ideal for: If you are unsure of how best to handle accounting tasks such as payroll taxes or bookkeeping duties, we recommend consulting a professional to get advice based on these areas and your expertise.
Do it yourself
If you're comfortable with numbers and accounting, you could try doing it yourself. You just need to make sure your bookkeeping software is up to date and fits the needs of your business.
When you factor in paying internal expenses and legal fees, the average cost of doing your own accounting can be around $1,000 per year.
Ideal for: Small business owners who are on a tight budget but can afford to devote time and effort to accounting.
Conclusion
If you are ready to go a step further or want to start your own business, a CPA can provide you with valuable advice and help you decide how to structure your business. If cost is a major obstacle, you can leverage accounting software to suit your business needs.
