My accounting interests include entrepreneurial support, small business accounting, strategic management, taxation, and consulting. Below, I provide a brief review of the basic services entrepreneurs and small business owners should consider. The purpose of this posting is not to solicit clients or to recommend specific products or practitioners. It is intended solely as an informational resource, to assist small business owners as they consider their accounting needs.
1. Financial Accounting
There is a difference between bookkeeping and financial accounting. Bookkeeping is the term used to describe the process of tracking sales/service revenue, expenses, and other amounts needed to create financial statements. Standard financial statements include the: (1) Income Statement (Profit & Loss Statement), (2) Balance Sheet, (3) Ownerâs Equity (Ownerâs Capital) Statement, and (4) Statement of Cash Flows.
Financial accounting is a more holistic function, encompassing: (1) oversight and supervision of accurate, appropriate bookkeeping and (2) compilation and/or review of reliable, legally-compliant financial statements. Bookkeeping can be automated, using cloud-based applications, or it can be housed on your personal/business computer(s), using software. Merchant Maverick compares various accounting packages, including QuickBooks and Xero . Additional information on small business bookkeeping and financial accounting can be found on sites such as: (1) Shopifty.com (2) Accounting.com (3) Score.org (4) Indinero.com (5) DaveRamsey.com (6) TheBalanceSMB.com
2. Cost/Managerial Accounting
Financial accounting allows small business owners to track their sales/service revenues and expenses, but additional analyses are required to minimize cost, maximize profit, and manage cash flows. Cost accounting uses financial accounting data and additional business-specific inputs to assist small business owners in critical decision-making. Cost management analyses clarify product-manufacturing, service, operating, overhead, selling, general, and administrative costs. These analyses also contribute to efficient and effective operational decisions, improved budgeting, effective business-process design, and improved cash flow management. Additional information, including a state-by-state guide to cost accounting and typical cost accounting methods can be found on sites such as: (1) AccountingEdu , (2) Investopedia , (3) AccountingCoach.com , (4) CFI.com , (5) YouTube , and (6) AccountingTools.com
3. Tax Compliance & Tax Planning
The Internal Revenue Service (IRS) requires small business owners (and investors) to file more complex tax returns than individuals who receive a W-2 from an employer. Tax compliance involves preparing accurate tax returns and paying appropriate taxes. However, business owners also need to do tax planning, to minimize their combined individual and business-tax obligations within the boundaries of tax regulations. Business ownersâ tax compliance and planning become more complex as their business interests, profitability, and personal income increase. Additional information on tax compliance and planning services can be found on sites such as: (1) CostHelper , (2) Wikipedia , (3) Chron.com , (4) F2F Marketing , (5) Ezine , and (6) Zenefits.com
4. Financial Planning
Business owners need to integrate their business interests and income into their personal financial planning. Financial planning includes a variety of issues, including (but not limited to) (1) business-succession, (2) retirement, (3) gift, estate and trust planning, (4) investment planning, (5) personal and business access to cash, (6) health, long-term care, and liability insurance, (7) asset/property management, and (8) philanthropic interests. When is it time to consult a financial planner and what will it cost? Additional information on financial planning can be found on sites such as: (1) MoneyUnder30 , (2) SmartAsset.com , (3) NerdWallet.com , (4) Investopedia , (5) FitSmallBusiness.com , and (6) Chron .
5. Forensic Accounting & Valuation Services
Recently, forensic accounting and valuation services have received increased recognition. TV and web programs highlight the use of accounting to provide evidence in civil and criminal court proceedings. However, from time to time, small business owners may require these services. Forensic and/or valuation specialists (usually CPAs with CFE or ABV credentials) often assist small business owners (and others) with (1) fraud, embezzlement, and theft investigations, (2) pre-merger and acquisition (M&A) assessments, (3) copyright, patent, and trademark-valuation disputes, (4) alimony and child support claims, and (5) business valuations. Not all forensic accountants provide valuation services, but many do. Additional information on forensic accounting and valuation services can be found on sites such as: (1) Chron.com1 , (2) GoodAccountants.com , (3) Investopedia.com , (4) HG.org , (5) CFI.com , and (6) Chron.com2 .
6. Summary
Small business owners should be cognizant of all the services listed above, but initially, their focus should be on financial accounting and tax compliance services. Ideally, these services should be obtained from a licensed CPA. As the business and the wealth of its owners grow, cost/managerial accounting, tax planning, and financial planning services become increasingly important. Additional business services, such as payroll, inventory-control, and legal consulting may also become necessary as the business progresses. Forensic and valuation services will likely only be necessary on an âas-neededâ basis. Individual, self-employed accountants can often provide the financial and tax compliance services nascent small businesses require. However, as businesses grow and become more complex, accounting firms that can provide more diversified expertise may be needed. Each business owner will have to decide if/when expanded services are required. Additional information on accounting services and their associated costs can be found on sites such as: (1) CostHelper , (2) Thumbtack , (3) FitSmallBusiness.com , (4) TheSelfEmployed.com , (5) AccountingToday.com , and (6) Chron.com .