Business Accounting

When you start a business it is important to get business credit advice and a business accounting system set up straight away, whether you are going to do it yourself, or hire an accountant or book keeper. Phil Thow a business and corporate credit expert, advises all business people to get this important business function up and running possibly even before you open your doors for business. Business accounting is like the brains of the business where the actual business is the heart. The brain keeps the heart in check and guides it along the right path. So it is with your business accounting system.

There are two basic types of business accounting, cash accounting and accrual basis. Phil Thow suggests analyzing these systems very carefully and seeking the advice of an accountant to see what is best for your particular business situation. With cash accounting sales are recorded as the money is received. Expenses are also treated this way. So, if you sold a widget today and received the money for the widget at the point of sale then the sale is recorded today. If you sold the item today, but didn’t receive the money until next Tuesday, then the sale is recorded on Tuesday. Consequently, if you bought supplies today, but didn’t pay for them until next month, the expense wouldn’t be recorded until next month.

Expert Phil Thow tells us that in the accrual basis of business accounting, the sale or expense is recorded when they are incurred. For instance, if the sale was made today it is recorded as revenue today. It’s difficult for some people to understand because it seems strange that you would record a sale yet, haven’t received the money. Phil Thow will tell you it’s an accounting thing, and may actually be the right one for your particular business. The same goes for expenses with the accrual basis. If you buy something today, but don’t pay for it for 60 days, it gets expensed today. You can probably see the tax benefit in that, right?

Whatever the case may be, Phil Thow insists you give the business accounting situation the proper thought, time and understanding in order to competently run your company. It’s not just important for taxes, business accounting is also important as it gives you a clear picture on paper of where your business is, allowing you to make the proper adjustments and maximize your financial success.