Small Business Bookkeeping FAQs

Whether you’re just starting out or have been in business for some time, bookkeeping and accounting often remain some of the less-favored activities a small business owner must undertake.

If your background doesn’t lie in managing finances (which is often the case for small business owners, and that’s okay), there can often be more questions than answers.

Lucky for you, answering those questions is our job! As a small business ourselves, we can understand and appreciate the importance of having access to the right resources for your business. We’re happy to provide expert financial advice and knowledge to help guide your business through all stages of growth.

To help answer some of the most commonly asked questions that we encounter, we’ve outlined several frequently asked questions and answers below.

Are Bookkeeping and Accounting the same?

Not quite, but they do go hand in hand. Bookkeeping is responsible for the recording of financial transactions, whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing financial data. Bookkeeping is very reactive, where you are recording transactions that have already happened. Accounting is more proactive, anticipating future financial needs and planning on how to meet them.

Why is bookkeeping important for a small business?

Bookkeeping has a few important benefits to a small business. First and foremost, keeping your books up to date is essential in the event your business gets audited. It also allows you to analyze and plan based on your collected data, helps minimize accounting costs, and saves you time during tax season since you’ve done the work to keep your finances updated throughout the year.

How does accounting help in decision-making?

Accurate accounting serves as a baseline analysis for investors and lenders. It can help to provide a financial health report on your business for creditors, like banks, who might be providing you with a business loan. It can also help to guide your business and allows for accurate forecasting should you choose to grow and scale in the future.

What software can help me automate my bookkeeping?

There are a variety of different software and technology tools that can help to automate your bookkeeping and accounting. These services can make a big impact on your business — they help reduce human error, improve efficiency, and save you time and money during tax season. A few of our preferred tools include QuickBooks Online, which is used for tracking and reporting, and Bill.com which helps manage accounts payable and accounts receivable. But these tools can only take you so far — you still need access to someone who can help manage the software and analyze the resulting data.

How can I improve my tax position to reduce my payout?

The quickest and easiest way to improve your tax position and reduce your payout is to work with an experienced CPA. They’ll help to make you aware of all deductions available to your business and will implement specific strategies to maximize your post-tax income and minimize your tax payout. As financial experts, they stay up to date on tax law and how any changes to current tax laws might affect your business.

The best part about using a trusted CPA is that they can partner with you, instead of just working for you, to help you understand your tax situation and what changes you can make within your business to improve it. By enlisting tax preparation and planning services, you’re setting yourself up for the greatest success around tax time (and really all year long).

How do I know if my small business is profitable?

A lot goes into determining if a company is profitable, especially over the long-term. Profit is the revenue remaining after you’ve paid all of your expenses. So, if you’re “in the black” after you’ve paid off all expenses, that generally means you’re profitable, at least for the most recent period of reporting time. But profitability can be largely impacted by positive and negative cash flow, so it is important that you track and forecast both.

What is a Growth and Profitability Advisor?

A Growth and Profitability advisor is a financial expert you hire to offer advice and help guide your business, especially if you’re looking to grow or scale. They can often help with bookkeeping and accounting services but go a step beyond that to truly partner with their clients and help them to gather and understand the holistic view of their organization. They can help clients to be more proactive instead of reactive which enables you to make projections for the future of your business and lessens the likelihood of any surprises.

How do I know if I need a Growth and Profitability Advisor?

There are a couple different scenarios in which it makes sense to hire a Growth and Profitability Advisor. If you’re looking to grow or scale your business in any way — whether you’re looking to hire more staff, open a new location, or purchase some expensive new equipment — that constitutes the perfect time to hire an advisor. Their expertise in financial planning and projections will help you to gather and analyze relevant data that you can in turn use to plan for the future of your business. Advisors can help you to think and function much more strategically, become more proactive with your planning, and ultimately help you to be better prepared should you need to pivot.

Alternatively, if your business is displaying one of the following warning signs, this would also signal the need to hire an advisor. 

• If you’ve got excess money sitting in the bank, it could probably be working much harder for you, and an advisor can help you understand how best to utilize it. 
• If your staff’s capacity isn’t being fully utilized, that could signify that you’ve either got too much staff, or tasks aren’t being delegated appropriately. 
• If your production is not running at full capacity, you’re probably wasting money and resources. 

While not an exhaustive list, these are all situations in which it would be extremely beneficial to hire a growth and profitability advisor.

How do I scale my small business?

We’ve identified 4 proven ways to scale a small business. Download our Guide to uncover those tips and the steps to each method.