What Every American Small Business Owner Needs to Know About Accounting

Managing expenses, paying taxes, managing payroll, and overall money management required to run many small businesses can take more time and effort than many business owners would like.

But the good news is that there are many products and services that make small business accounting easier than ever. If you’re just starting a small business, here are three basic accounting principles you need to know and some suggestions for managing your accounting needs.

1. You need a small business bank account.

The first and most important step in small business accounting is opening a small business bank account. It’s important to keep your personal accounts separate from your business accounts for taxes, expenses, and income.

A business bank account can also help you protect your personal assets from becoming subject to certain tax audits, bankruptcy, or lawsuits if any of these situations arise for your business.

Importantly, a business bank account can also be helpful when applying for a business loan or business credit card by providing a clear picture of your business expenses and revenues.

method: Find a bank that offers the services you want, including checking accounts, savings accounts, and business credit cards. Some business bank accounts charge fees of up to $15 to $25 per month, while others may charge transaction fees. Some online business accounts may have lower fees, but do your research to see if they offer the level of customer service you want.

2. Cost tracking is important

When starting a business, tracking expenses may not seem like a big problem. How hard can it be?

But imagine your employees purchasing supplies for your business while you and your managers use your business credit card to replenish inventory. Meanwhile, salaries need to be paid every two weeks, rent needs to be paid every month, and unexpected expenses need to be covered to keep the business running.

The point here is that there are too many costs to keep track of in your head. You can easily manage it while running other aspects of your business. Fortunately, business expense tracking software allows you to see all of this right away.

method: Managing your business expenses requires finding the right software for your business. The best way to do this is to take a look at The Ascent’s comparison of the best small business expense software to find one that provides the services you need at a price you’re willing to pay. The software should include mobile functionality for uploading receipts, the ability to integrate credit card transactions, and the ability to set expense policy rules in the software.

3. Choose the right accounting software

Lastly, one of the most important things small businesses need to know about accounting is, of course, finding the right accounting software.

Good accounting software helps you manage your finances by tracking invoices, paying bills, budgeting, and overall money management. This means you can zoom in and see your total revenue and expenses for the past few quarters, check your projected tax liabilities, and generate financial reports for your business.

It is worth mentioning here that many small businesses incorrectly assume that they do not need accounting software. It’s tempting to do it yourself using spreadsheets, but there are many great accounting programs on the market. Some of them are available for as little as $10 per month, so there’s absolutely no reason to avoid accounting software.

method: Find the best accounting software for your small business by considering how it will help you with invoicing, billing, and budget management. You’ll want to find software that integrates easily with your bank and e-commerce accounts (if you have them) and helps you manage your tax liabilities.

Separating your personal and business bank accounts, tracking expenses, and using the right accounting software can go a long way in managing your small business. The earlier you start doing all three, the easier it will be to manage your money and ensure the financial health of your small business.

NOTE: Our top-tier cashback cards now offer a 0% introductory APR through 2025.

This credit card isn’t just good. A truly outstanding card that our experts use personally. Features a long 0% intro APR period, cash back rates of up to 5%, and no annual fee! Click here to read the full review for free and apply in just 2 minutes.