If you are running a small or home business, you have to keep accounts. However, many small business owners have never been trained in accounting and do not find this to be a very easy task. Consequently, the question you need to ask is : “Should you do your own accounting, or get someone else to do it?”
Logically, the first question to ask is: “Are you curious about numbers?” Any person who answers “no” to that question will probably be incapable of undertaking the bookkeeping task him or herself.
Another question is: “Do you like tracking invoices?” This task is very important as you must get customers to pay their invoices to ensure the cash flow of the business.
If you are considering doing your own bookkeeping, you need to find an accounting software program you can understand.
Most accounting software programs require you to understand debits and credits along with other accounting terms such as the dissection of transactions into assets, liabilities, equity, revenue and expenses. This is often confusing for a person who has not been trained in accounting.
Keep in mind that understanding accounting principles is absolutely vital to your using these programs. Consequently, you may need to do some training or undertake some education to better understand accounting and how it works.
Having said that, there are some small business accounting programs that allow you to track your transactions and keep your records up to date, and then pass them to your tax adviser or accountant to complete the financial statements.
These are often termed ‘single entry’ accounting programs and they are much easier to use because they are not complicated by you needing to understand about debits and credits.
In fact, for many small business owners, this will be all they need because various countries allow small businesses to lodge their taxes on a simplified cash basis. This not only makes it easier to keep your accounts, it also means you only have to pay tax on money you have received, and not on sales you have made where customers still owe you the money.