Mistakes done in your accounting can have serious consequences on your business, such as heavy fines for tax evasion. For a bigger establishment, this can affect both the reputation and finances of the company. For a smaller corporation, it can have a great impact and even make a company go under loss if there is not sufficient money to pay off the fine money.
Therefore, good accounting is important right from the beginning. Owners of many small businesses say still believe that they don’t need any type of accounting, and they only go for basic bookkeeping, but this is not right. It is important for every business, regardless of the size, to start accounting process right from the time it involves in some type of trading. Just keeping track of invoices and receipts of customers is not sufficient, the business should arrange for a simple but detailed system to record the transactions made and to generate reports when required. A good accounting will make sure of the success of your business in the long run.
When you establish a small business, you should open an individual bank account for it. It is not common for individual traders to just use their personal checking account for their company but this makes it impossible or difficult and takes a lot of time to perform reconciliation, which is an investigation to make sure that the figure produced by your bookkeeping should match with the amount in the account.
Reconciling your accounts and books from time to time is a good way to avoid any errors. Thus if the figures do not sum up you will have the chance of correcting the error. Just imagine that you are trying to find some receipt from last year, this kind of problem can appear and be impossible to fix if you only go through your books along with bank statement before submitting for annual tax return. This is where small business accounting comes to the rescue.