Accounting can be one of the least appealing aspects of owning a small business—but it doesn’t have to be. Here are some ways accounting can help you not only to keep accurate books but to push your business to succeed as well. 1. Bookkeeping vs. Accounting The first thing you should know about small business accounting: what accounting is, especially when compared to bookkeeping. Even though the terms are often used interchangeably, there are important differences between them—and understanding each concept will help you develop a concise awareness of your company’s financial situation. In broad terms, bookkeeping is keeping records, particularly of cash inflows and outflows. Accounting is the skill of deciphering your financial history, understanding your business’s current cash-related state of affairs, and making educated financial predictions about the future. Accounting includes deciding how to categorize different financial records, too. In terms of hiring, an accountant position usually requires more certification and education than a bookkeeper. If you’re doing most of your business’s record-keeping yourself, know that—while solely keeping accurate books is vital—you should also be taking time to understand how your business is progressing financially and doing regular business planning. 2. Recording All Income and Expenses Before you can begin business planning, though, you need to have bookkeeping records. As a small business owner, you should be keeping records of all cash coming in and going out of a business, even if you are self-employed. Recording all your mileage and business expenses is critical for tax reasons, and it’s also the only way to get an accurate read on your company’s financial health. Fortunately, this is what spreadsheets are for—and there’s an entire field of bookkeeping-software options and point-of-sale programs to help you master this basic, but critical, element of small business accounting. 3. Separate Business From Personal Especially if you are self-employed, it can be easy to mix up business and personal spending. This can lead to huge bookkeeping issues down the line, so it’s important to stay vigilant. Open separate personal and business bank accounts and lines of credit, and ensure there’s a record of what share of your earnings you’re taking as your salary. 4. Stay On Top of Invoicing Although it can be a headache, being attentive to your unpaid invoices is one of the best ways to avoid a devastating cash crunch. Sending out invoices in a timely manner and consistently following up with any delinquent clients are necessary skills for keeping income flowing into your business. Maintain detailed records of all your invoices and secure agreements about when these invoices will be paid. Because we live in an imperfect world, you’ll also want to formulate a strategy for reminding and potentially penalizing clients who don’t pay on time. 5. Good Books Can Lead to Funding Accurate records will be required by most lenders, which is why it’s smart to keep your books up-to-date instead of rushing around to collect receipts in order to get the quick influx of capital that you needed yesterday. By staying on top of your accounting, you significantly increase your chances of qualifying for a business loan. Lenders often want to understand how your business will succeed through time, so updating your financial plans regularly will likely make the application process simpler, depending on the type of funding you’re seeking. 6. There’s an App for That Fortunately for small business owners, technology has advanced to make accounting and bookkeeping far more efficient. A lot of options, such as the Lendio app, automatically record business expenses and income from your banking accounts and create invoices. Automating and outsourcing your accounting needs is very common in the small business community. Using accounting software can be very helpful in your business’s early days; as you expand, you should explore hiring either an in-house accountant or a financial professional. 7. Know Your Business’s Structure One of the first actions you need to take with your company: decide how it will be structured. Most importantly, this will impact how you are taxed, but it also impacts other factors, like how you can reimburse yourself. Some common business structures include a sole proprietorship, a limited liability company (LLC), or a corporation. All of these have different benefits—so you should do some detailed research before making this decision. 8. Prepare for the IRS The most obvious reason to keep detailed business records is the Internal Revenue Service. It can be easy, if you’re new to operating a business, to leave all the accounting until April—which then becomes a nightmare of trying to find the previous year’s receipts. Instead, record everything and keep your bookkeeping accurate year-round. Not only will it take the sting out of tax time, but you’ll also have a much better sense of how your business is doing throughout the year.