Separating personal and business accounts is an important first step for micro-business owners because it can reduce legal risk and liability come tax season, Camp added. Splitting up accounts can also be beneficial in accessing tax benefits or building rewards on business credit cards. For example, while a home-office setup has the potential to be deducted as a business expense, something like a car with both business and personal uses can be more complicated.

The dashboard is well organized with clear graphics for each feature and easy-to-read reports that simplify finances for non-accountant business owners. Wave Accounting is a good free accounting option for budget-cautious freelancers and small-business owners. Investing in different areas of your business can be an important next step. An accountant can help you assess which investments will best support your business goals, like increased brand awareness, better quality leads, and ultimately more revenue, while still making good financial sense. Investing in accounting software can make it easier to automate financial tasks, improve accuracy, compile data, produce reports, and comply with laws and regulations. When deciding on a software, consider which features you need and how much you’re willing to spend.

Invoice and bill management

Business owners or accountants can then use these statements to gain insight into the business’s financial health. Accounting software is a computer program that helps businesses track income and expenses. The software can also be used to generate reports, such as profit and loss statements and balance sheets.

Sure, QuickBooks could be the best software for your small business, or you might find its prices too high and its features too limited. Depending on what you need, another business accounting bookkeeping software pick like FreshBooks or Sage could be better for your business. Check out our list of the year’s best QuickBooks alternatives to get started.

What is accounting software?

And if that’s not enough, think about the trouble you’ll have to go through when the IRS comes knocking on your door to collect taxes. Recording data correctly is just the first step in doing accounting for your small business. The table below summarizes most of the accounts (and their types) that you might need to use while doing accounting for your small business. You can find the 8 most common accounts that any small business will have to use for their accounting highlighted in blue. As a business owner, accounting is probably the last thing you want to worry about.

Another entry to make in your adjusted trial balance is depreciation. Depreciation is a way to write off the cost of long-term assets your business owns over their useful life. The best accounting software can track depreciation for you and record it to accumulated depreciation, a contra asset account on the balance sheet. If you’re not sure which accounting process you should use, talk to a certified public accountant or other small business accounting professionals. If you don’t have a tax professional, ask your in house accountant or another small business owner for a referral. An accounting firm that specializes in helping small businesses can be an invaluable resource.

Most Common Accounting Reports for a Small Business

Bench is a cloud-based accounting firm that offers full-service bookkeeping for both cash-basis and accrual-based accounting. When you sign up with Bench, you are assigned a team of accountants dedicated to your business who take over the entire bookkeeping process from start to finish. Running a small business with a limited number of employees and a tight budget is a serious challenge. From managing payroll and taxes to bookkeeping and financial planning, there are a lot of administrative tasks that can take your focus away from growing your business. That’s why an increasing number of small businesses are turning to online accounting firms for help. In addition to automating accounts payable and accurately tracking and balancing your books, cloud-based accounting software can often integrate with the other software you use.