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Every year, more and more people decide to follow their passions and start their own business. However, with this endeavor comes a task that no one is looking forward to: bookkeeping.

Although they can be excessively boring, time-consuming and even difficult, accounting and bookkeeping are essential tasks when running a business. Without strong accounting skills, new business owners cannot maintain healthy cash flow or grow profits sufficiently, which can ultimately lead to failure.

To avoid financial hardship, all new business owners should work on their accounting and bookkeeping skills. Here are the top five accounting skills you should focus on.

1) Use accounting software

Cloud-based accounting software is a must-have tool for new business owners. If you lack accounting experience, accounting software can give you the support you need to start learning how to run a successful business.

Additionally, accounting software allows you to automate a wide range of accounting tasks, allowing you to spend less time on accounting and more time on other areas of your business. For example, if you choose Xero or Sage accounting software, you can enjoy fantastic features such as invoice generation, payroll, bank reconciliation and reporting.

2) Monitoring your financial performance

One of the most important accounting skills you need to develop as a new business owner is the ability to monitor your business’ financial performance. This will help you catch problems before they escalate and threaten your business.

To monitor your business finances, you need to track your cash flow, which is the amount of money transferred to and from your business. To do this, you need to monitor your business bank account (which should be separate from your personal bank account) and produce a cash flow statement. By keeping control of your cash flow, you can ensure that your business always has enough cash and won’t be crippled by a late payment.

Another financial document to pay attention to is your balance sheet. This summarizes your liabilities, assets and equity. By checking your balance sheet, you can accurately assess your business’ current financial position by seeing what it owes and what it is worth.

3) Forecast

Once you have a good understanding of your business finances, you will be able to make accurate financial projections. Forecasting future finances will help you spot problems early and choose the right direction for your business.

To help you make forecasts, you can use the helpful tools provided by your chosen accounting software. Many accounting packages include detailed financial reports and forecasts, saving you time and effort.

4) Calculation of taxes

Tax returns worry many new business owners, but if you learn how to file your returns quickly and accurately, you can eliminate some of the stress associated with this task and spend more time on other parts of your business. .

A key tip is to automatically transfer your estimated tax money to a separate account so you don’t spend it. Then, as your tax filing deadline approaches, you should start calculating your taxes as soon as possible. Your accounting software will be a fantastic resource for accomplishing this task.

5) Know when to outsource

Finally, it’s important to understand your limits and ask for help when you need it. If you struggle with the accounting side of your business or just don’t have enough time for it, hiring an accountant might be the perfect solution.

However, don’t assume that you can just hire an accountant upfront and never learn accounting skills. To be a good business owner, you still need to understand and keep track of your business finances, even if you hire an accountant to handle the time-consuming tasks for you.

Final Thoughts: Developing Your Accounting Skills

Accounting may not be your passion, but it is still vitally important in running a business. To ensure your business thrives, you should always stay in control of your finances and develop your accounting skills, no matter how difficult you find this process.

However, if you need further assistance, there are a few options available to you. Accounting software is a huge benefit to any business, and hiring an accountant is a smart move as your business grows.