One size doesn’t fit everyone when it comes to bookkeeping. How a small business keeps its accounting records may seem completely different than the accounting processes of a medium or large sized company. Two companies operating in the same industry and with the same target audience may have different internal operations, accounting requirements, and rules, all due to the size of each. In this way, comparing large and small business bookkeeping can help you know what to expect as your small business grows. In this article we will explain more about it.
• Accounting activity volume
An obvious difference between a small business and a larger business is the volume of activity. A smaller business does fewer transactions, which generally means fewer paper invoices and electronic records to handle. If you are still in the early stages of your business, you probably have fewer suppliers, fewer customer accounts, and a smaller general accounting plan. From an accounting point of view, the smaller volume generally means that you need less maintenance to handle the books. Your financial statements are simpler to compile, read, and explain. Your ledger is cleaner, so keeping your accounting records will be a much easier task, however, this does not mean that you do not require the advice of an expert, since maintaining order and control from the early stages of your business guarantees better future accounting activities.
Now, if your case is that of a growing business, you should bear in mind that the volume increases, things become a little more complex and it may take much longer to keep up with the highest number of invoices, documentation and annotation of accounting records. You will be managing more vendors and customer accounts, adding to more paperwork and potentially complex accounting situations. Bringing an accountant or accountant when the business starts to recover can help you stay on top of your books. Your accountant can also help you understand the complexities that most business often entails.
Bookkeeping is the process of daily record keeping of all financial transactions of a company. Accountants record the company’s sales, expenses, cash and bank transactions in a general ledger. One of the important habits to develop when starting a business is to record the transactions in that book. Remember, the ledger and its accuracy are critical to your company’s finances.
Recording these transactions is known as posting. An accountant can also generate invoices and / or complete payroll. The complexity of the accounting process depends on the size of your business and the number of transactions carried out daily, weekly and monthly.
What should your company account for?
The following nine accounts must be created and tracked by all companies to provide adequate financial information to the company’s accountant for financial statements and taxes:
- Cash: The Cash Ledger often has two parts which are: Cash Receipts and Cash Payments, which are also used to complete the Cash Budget.
- Accounts receivable: If your company allows credit accounts, then it has accounts receivable. This information is used to generate invoices and send invoices to your credit clients.
- Inventory: If you sell products instead of services, you have inventory to track.
- Accounts Payable: If you buy items such as office supplies for your business and use credit, you will have Accounts Payable. This account is also called business credit, and it’s what you owe your providers.
- Loans Payable: If you have borrowed money to make larger purchases, you should be able to keep track of your due dates and payments.
- Sales: You must be able to track your sales, either on credit or in cash.
- Payroll expenses: The cost of paying your employees.
- Purchases: This includes finished goods or raw materials.
- Shareholders profits distribution: This is the amount the business owner takes from the business.
In the same way, it should be noted that despite the fact that the Commercial Code imposes the obligation to keep accounts, the truth is that this reality transcends what is legal to deliver multiple benefits to small companies that scale the market. The Commercial Code established that in Colombia all legal or natural persons who are considered merchants are required to keep accounts.
Learn how tax records work.
In this way, if you are looking to control the expenses of your company, plan for the future, better manage cash flow and achieve profitability, keeping accounting with the help of technology or a professional accountant is the answer. The information offered by the figures recorded in your business accounting will make you make better strategic decisions.