Every business relies on financial data to analyze their performance and make critical decisions. Someone has to build the bookkeeping system, monitor it for accuracy, and interpret the results. These processes are called "Accounting."
The accounting process is much less mechanical than that of bookkeeping. It is more subjective in nature. It begins with implementing a system that will benefit the business by capturing the financial information in a useful manner. Once set up, the system must be monitored and adjusted to ensure accuracy and transparency. And finally, on a monthly basis usually, the financial statements will be prepared and presented to the business management in such a way that decisions can be made.
When buying products, a business receives a purchase receipt from the supplier. When borrowing money from the bank, a business signs a promissory note payable, a copy of which the business keeps. When a customer uses a credit card to buy the business’s product or service, the business gets the credit card slip as evidence of the transaction.
Bookkeeping involves the recording of these financial transactions. Each transaction will have to be identified, sorted, and stored in a manner so that they can be retrieved and presented in the company's financial statements and other reports.
Keeping the books current and consistent is the key to creating a smooth experience.
Taxes are a year-round project that deserves plenty of forethought and planning. The first step for any new business is to decide how to structure themselves to limit their tax liability.
The next thing to consider will be how to handle quarterly and monthly filings with various local, state, and federal agencies. Naturally, the employees and contractors will be counting on you and your business to provide their tax documents quickly and accurately.
With the close of each month, quarter, and year you may have a tax obligation to uphold.
How much this will cost in dollars and potentially your sanity will rely heavily on the quality of the accounting system.