Wednesday, September 19, 2012

The Need for Proper Accounting in Small Business

Small business owners may not be properly equipped to carry out some of the functions required in an organization such as accounting. This does not mean that those functions that an entrepreneur is not properly equipped to handle should be left unattended. Accounting is one of the key functions of any business and it is important because it provides the proper records of the business and presents information for decision making.

If you do not have good accounting practice in your business, how are you going to know the true state of the business? Whether it is making a profit or a loss, who are your debtors and creditors et cetera. All of these pieces of information must be accurately prepared and presented by an accountant if the entrepreneur is not skilled enough to do it.

For many small businesses employing an accountant may be too costly. In such situations there should be someone with some basic book keeping skills, someone who can record the transactions entered by the business. An accountant’s services may be obtained in a freelance capacity to ensure that the accounting records for each month are in order.

Keeping proper accounting records is essential for paying the relevant taxes that the government requires you to pay as a small business in your locality. Computing your tax payment will be much easier if you keep proper accounting records. However, if you fail to keep proper accounts then you may end up paying more tax than you ought to. Accounting is a function that many small business owners shy away from, but for your business to grow and prosper, it is indispensable.

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