Did you know that in 2016, there were 664,532 active and licensed CPAs in the U.S. alone?
That’s almost two-thirds of a million, and it doesn’t even include non-certified accountants!
Either way, this proves that you have a lot of options to choose from if you need a business accountant. Before you do that though, you should first prepare to shell out between $43,020 and $122,220 a year on their services.
That’s right. That’s how expensive it is to hire an accountant for your business.
The good thing is, you don’t necessarily need a CPA to look out for your business’ finances. Today, you can be your own accountant with the use of robust accounting software.
Ready to save the money you’d otherwise spend on paying an accountant? Keep reading then so you can learn all about how to crunch numbers, from invoices to taxes, on your own!
When It’s Fine to Be Your Very Own Business Accountant
All businesses have the absolute need for an accountant. But this doesn’t mean you need to hire a professional accountant all the time. There are some situations wherein you being an accountant for your own business is fine.
Here are three such instances wherein you can do your own business accounting tasks.
You Have a Simple Tax Situation
This means your personal taxes are simple and you own your business as a sole proprietor. In this case, you can be your very own personal accountant using simple tools and software. Today’s self-employed accounting programs are easy to use and master.
Your Business Is a Side Hustle
Perhaps you only sell baked goodies during the weekends or on a made-to-order basis. Maybe you offer your culinary prowess and expertise only outside of your main job. Either way, both are actually “hobbies” which don’t warrant a hired accountant.
Keep in mind that although these are hobbies, you still have tax-reporting responsibilities. The good news is, you can go for the DIY approach to track costs and expenditures. For this, a simple accounting spreadsheet would do the trick.
You Need Accounting for Your Freelance Projects
Thinking of joining the 53 million Americans who freelance? If so, then lucky you, as you can do your own accounting for such projects. Like a hobby side hustle, a spreadsheet would be enough to track your cash outflows and inflows.
If you’ll handle many clients, it’s best to use more advanced software, like UltimateTax. Such programs tally and total income and expenses, as well as create and file tax reports. These also let you create invoices and receipts for other freelancers who’ll work for you.
Getting Started on DIY Accounting: Learn the Skills of the Trade
Although accounting software does the bulk of the work, you still need to learn the skills of the trade. Don’t worry, as there are loads of YouTube tutorial videos that can help you get started. The best accounting software also features these easy-to-grasp instructions.
In any case, be sure to acquire these must-have skills first before you do your own accounting. This way, you can avoid errors that often arise from “guesstimating”.
Computer Skills (Especially Spreadsheets)
Did you know that about 750 million folks all over the world use Microsoft Excel? As surprising as that may be, the truth is, Excel and other similar programs are crucial in accounting.
After all, they’re your source of spreadsheets, which you need for accounting tables.
That said, take some time getting to know basic spreadsheet functions and formulas. Start by learning the basic functions, like SUM, AVERAGE, COUNT, TRIM, IF, MAX, and MIN.
Understanding of Accounting Terminology and Jargon
Heads up: There are over 1,000 accounting terms that get even pros confused. The good news is, you don’t have to memorize all these to become your own accountant for your business. You can get started by familiarizing yourself with most-common used terms.
These include “income statement”, “balance sheet”, “expenses”, “assets”, “dividends”, “credit”, “debit”, and “balance”. You’ll also encounter “capital”, “cash flow”, and “general ledger” when using accounting software.
You’ll find these in accounting books for small businesses, which you can buy or read online. The IRS website is also a good place to learn tax-related terms and processes. You definitely want to delve deeper into the IRS, so you can learn how to keep your tax records free of issues.
Bookkeeping is the daily process of tracking and recording transactions. These include expenses, payments made to your business, and profits.
Aside from recording, you also need to categorize these transactions. You need to learn whether to file such transactions as credits or debits. You should also take note of taxable and non-taxable expenses.
Reconciling bank statements is also best done on a day-to-day basis. This involves comparing your records with your bank’s records. It ensures your account balance is the same on your records and on actual bank records.
Take a Few Online Courses on Accounting
Take advantage of free online accounting courses to further hone your number-crunching skills! Many legitimate platforms, like Udemy, offer accounting tutorials at absolutely no cost. Best of all, you’ll learn from accounting experts who use easy-to-understand teaching methods.
A great course to get you started is one that teaches basic accounting for business owners. It should summarize business accounting for small business owners. It should also teach you the basic lingo used in the SMB sector, such as assets, liabilities, and equities.
You’ll also find free online courses for MS Excel, which can teach you about mapping tables. With these classes, you’ll learn how to enter and calculate data using spreadsheets. You should also look for courses that cover data and label translation.
If you have time, take as many of the applicable courses as you can. Aside from being free, many of the lectures run only for a couple of hours anyway. Spend a few days poring over these free lessons so you can start your DIY accounting on the right foot.
Invest in Good Accounting Software
Once you have enough accounting skills and know-how, invest in good accounting software. Two of the top programs for beginners are QuickBooks and Quicken. They’re easy enough for newbies and robust enough for more advanced accounting functions.
These programs come with courses and tutorials that’ll make it easy for you to use the software. Who knows, you may grow really fond of accounting by learning it through these tools. You may even end up starting a bookkeeping business with Quickbooks!
What’s important is to pick a program that allows you to balance your credits and debits. It should also let you create and automate payroll, invoices, and other fixed payments. Summing up of monthly balances is another feature you want in your program.
With these functions, you’ll find it easier to crunch your own business taxes at the end of the year. After all, the last thing you want is to be one of the one in five taxpayers at risk of IRS penalty. With the right accounting program, you can calculate your taxes right and be able to pay on time.
Organize and Create Back Ups of Your Accounting Files
While the best accounting programs save copies of your books, you want your own backups. Save copies of invoices, receipts, checks, and other documents in a separate location. This way, in case you ever get audited, you’ll have proof of documentation to present.
Enter Expenses in Your Accounting Software as They Occur
Tracking your expenses as they occur helps prevent discrepancies in your books. This is also why you need to have copies of all receipts. If possible, enter expenditures at the end of the day before you forget to input them.
If not on a daily basis, then at least by the end of every business week. You can also pre-set your accounting software to include monthly fixed expenses.
Regular monitoring of your expenses allows you to check how your business is doing. You’ll see if it’s actually growing or if you’re spending more than what you’re making. It’s also crucial for building financial statements and simplifying tax return preparation.
Always Compare Your Reports at the End of the Month
Before the end of the first month of doing your own accounting, compare your reports. See if they all balance out or if there are any discrepancies. You want to review your reports before the month ends, so you can make the necessary changes.
This also helps you figure out which of your accounting skills you need to improve. If there’s something you’re having trouble with, take a free online refresher course. And make sure you correct those discrepancies before the next month starts!
Be Your Own Boss and Accountant Now
As you can see, being your own personal or business accountant is completely doable. Just make sure you don’t cut corners, especially when learning the skills of the trade.
Once you get the hang of it, you’ll have an easier time entering data into your spreadsheets. From there, you can start playing around with more advanced accounting software functions.
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