8 types of bookkeeping accounts for small businesses
As a small business owner, you know the accounts need to get done. But you didn’t start a business to learn about bookkeeping. You might not be an expert when it comes to knowing all the ins and outs.
That’s what we’re here for. We’re taking you through 8 basic bookkeeping accounts for small businesses.
Taking things right down to basics. If you’re running a business that uses money (which all do!), you’ll need a cash account. All your business transactions will pass through the cash account, which is then used to track your activity and manage cash flow.
If you’re a business that sells stock, you’ll need to have a clear idea of how much stock is being used, and how much is sitting on the shelf. If you’re not selling products, it’s wasted money. You need to keep careful track of how much inventory you’ve got, so you can figure out how much more or less you need. It’s also important to do physical counts of your inventory from time to time to make sure it matches your books.
Your company might not collect payment straight away. If that’s the case, you’ll need to track Accounts Receivable. Accounts receivable is the amount of money owed to you by customers who haven’t yet paid for your product or service. You need to monitor these to make sure you’re sending bills and invoices on time.
Accounts payable is what your company owes to your creditors. Keeping on top of your accounts payable ensures you’re paying people on time, the right amount, and maybe even early! This could make you eligible for discounts in the future, or at least help build rapport with your creditors.
Your sales account will track all the incoming revenue from the product or service you sell. Without having a clear picture of the sales account, you won’t know where your business stands in terms of cash flow, which can delay payments and paying back loans.
If ‘sales’ is tracking what you sell, ‘purchases’ is tracking what you buy. Any raw materials or finished goods you buy for your business will need to be reported on your purchases accounts. Once you’ve subtracted your purchases from your sales, you can work out your Cost of Goods Sold. You can then use this to figure out your gross profit.
If you’ve borrowed money to buy equipment for your business, your loans payable account will track all the payments, along with due dates.
Payroll expenses can often be the biggest cost for your business. You need to make sure you’re keeping an accurate record of your payroll expenses for tax purposes and other government reporting requirements. Along with making sure your employees are being paid correctly. Failing to pay the right tax or underpay your employees could cause some serious legal and reputational damage to your business.
Still have questions?
At Numero, we’re not interested in using fancy jargon, we want our clients to understand us every step of the way. From accounts management to software training and data conversion, we want to make sure you’re getting the most out of your accounts. All the perks, none of the hassle.
For more information and guidance on all things bookkeeping, get in touch with us today.
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