Accounting is an important component of business operations, regardless of the size of the company. However, smaller businesses often face unique accounting challenges that larger businesses may not encounter. Below are some of the most common accounting challenges small businesses can face.
Payroll is a big job for businesses of all sizes. Every pay period, you must calculate wages and withholding accurately based on the number of hours worked. You must also make sure that your employees, the state government and the federal government receive their payments on time. Payroll mistakes can be incredibly costly for your business, so it is important to ensure that this task is in good hands.
- Unexpected expenses.
Many small businesses operate with limited capital. When unexpected expenses arise, your business may not have enough money available to cover it. To avoid problems related to unexpected expenses, businesses should try to put away some money for emergencies. Small businesses should also have a contingency plan in place to cover any expenses they cannot afford, such as access to a line of credit.
- Cash flow problems.
All business need reliable cash flow in order to continue operating properly. However, many small businesses suffer from cash flow problems that can make it difficult to maintain smooth operations. To avoid cash flow problems, small businesses should manage their cash flow carefully by minimizing expenses, invoicing customers immediately and being proactive about collections.
All businesses must pay taxes. Missing out on tax deductions and/or overestimating how much you owe can lead to over-payment, which harms your business's profitability. On the other hand, taking deductions for which you don't qualify and/or underestimating what you owe can lead to an underpayment of taxes, which may result in IRS penalties. Thus, making sure that you are paying no more and no less than you need to pay is essential. Unfortunately, tax law is complicated, so many small businesses struggle with this issue.
- Managing data.
In order to ensure accurate payroll, taxes and business financial reports, businesses manage significant amounts of important data. For smaller businesses, this task can be daunting. Software exists to help your small business keep track of financial records, but you must still make sure that these records stay up-to-date and accurate.
Many of the accounting challenges faced by small businesses can be managed with the help of a third-party accounting provider. When you entrust your business's accounting needs to a reliable company, you don't have to worry about dealing with these challenges on your own. PADGETT BUSINESS SERVICES®
provides a wide variety of accounting services for small businesses, from payroll management to tax consulting.
Do you have the support you need to manage your small business bookkeeping?
Schedule a 30-minute appointment to speak with a local small business adviser.