As a small business owner, you get to make all the decisions related to your business.
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One of the most important decisions you will make concerns who is going to do your accounting.
In essence, you have four options for small business accounting:
- Option 1. Maintain the books on your own.
- Option 2. Hire a bookkeeper, either on a full-time or part-time basis.
- Option 3. Hire an accountant, such as the accountant who set up your books.
- Option 4. Have a friend or relative do your accounting for you.
- Option 5. Set up a hybrid system in which you maintain the day-to day reports, while an accountant does the period-end record preparation, summaries and reconciliations and the returns for sales tax, excise tax and payroll taxes.
In making the choice, you must decide whether you have the ability and time to set up and maintain an accounting system or if you should engage an outside accounting service.
It is usually suggested that you hire an accountant to do the final year-end accounting and tax preparations and to advise you on business, accounting and tax issues.
Payroll is a fairly tedious task, with steep fines if you make mistakes. These days, unless you yourself have a strong accounting or financial background, it's recommended that you outsource payroll.
Don't delegate accounting to somebody else and then forget about it. No matter which accounting option you choose, you should remain familiar with your books and actively participate in the record-keeping process.
Staying on top of your accounting in this fashion will maximize the value of the services provided by the outside accountant or bookkeeper.
More importantly, it will allow you to keep track of your business and make smarter business decisions.