The goal of every business is to make a profit. This is where accounting comes in – to give you insights into your business’s financial position.

It also helps you fulfill your financial obligations – such as generating invoices, completing the payroll, and covering taxes while keeping your business afloat. 

Accounting for small businesses like retail stores involves keeping a complete record of all the income and expenses and extracting financial information from business transactions.

This is why, like any other business, small business accounting includes bookkeeping, tax preparation, payroll, invoices, tracking expenses and more.

This post will guide you through what accounting for small businesses entails and the four key financial reporting requirements for small businesses. 

Important accounting terms for small businesses

The accounting language can be confusing to someone just looking to start/run a business with no training in the field, but it’s vital because it provides a common glossary for communicating your company’s finances. The primary accounting terms are as vital to small businesses as they are to other business entities:

• Accounts payable – debts that a company owes to its suppliers.
• Accounts receivable –  money that other entities owe to your business.
• Assets – things owned by a business that hold value.
• Liabilities – company debts or owned items that will depreciate. 
• Chart of accounts – the funds used by a business.
• Expenses – the costs involved in operating the business. 
• General ledger – a record of all financial transactions made by a business.
• A journal entry – a financial transaction entry in the general ledger.
• Revenue – income received by the company.
• A trial balance – lists all account balances at a specific time.
• Cash flow statement – tracks your company’s inflows and outflows of cash
• Balance sheet – an overview of your company’s position at a particular time (shareholder equity, assets, and liabilities)
• Income statement – also called profit and loss statement, it contains your company’s revenues, expenses, and net income
• Taxes – mandatory fees or statutory obligations imposed on businesses by the government for carrying out the business. 

These are general accounting terms. While you may use these terms on a day-to-day basis, they are a good glossary for references whenever you need to understand what your business accounting will entail.

Accounting vs. bookkeeping for small business

Accounting and bookkeeping mean different things.

One of the main differences between accounting and bookkeeping is in recording financial transactions. 

Bookkeeping primarily focuses on recording and maintaining up-to-date financial transactions – including financial statements, balance sheets, ledgers, invoices and accounts receivable. Accounting involves more than just recording financial transactions. It includes analyzing, interpreting and communicating financial information.  

Both, however, provide information to help make business decisions.

4 Key Financial Reporting For Small Businesses 

Financial reports are essential tools that help you make informed business decisions. As a small business or retail owner, you’ll produce three primary financial reports: the balance sheet, income statement, trial balance and cash flow statement. 

They all track financial metrics over a period and report on your business’s financial position.

1. Balance sheet

The balance sheet is an overview of your company’s shareholder equity, assets, and liabilities. It’s the official statement of your business’s financial position – a snapshot of your business’s financial status at a specific time. It provides insight into how well-positioned your business is to handle financial challenges.

2. Income statement 

The income statement, also called the profit and loss statement, shows your company’s revenues, expenses and net income within a month, quarter, half year or year. 

The Profit and Loss Statement provides valuable insights into your business’s profitability, revenue trends and expenses. It clearly shows whether your business is making or losing money and why.

3. Cash flow statement

The cash flow statement or statement of cash flow tracks your business’s cash inflows and outflows.

More than 29% of small businesses fail because they run out of money. To avoid this, you need to know how to always understand your business’s cash flow before it gets too late.  

Understand the money coming in, going out, and being invested—and how it impacts your business.

4. Trial balance 

The trial balance is a financial report that lists all the balances from your business’s general ledger accounts at a specific time. It shows the business accounts that have debits or credits during an accounting period. 

Note: While a cash flow statement tracks the actual inflow and outflow of cash over a period, highlighting liquidity and operational performance, a trial balance lists all ledger account balances to ensure debits equal credits and the books are in balance.

You can learn more about financial statements for small businesses in detail in this post: 3 Key Financial Statements Your Business. In addition, BizKit can help you produce financial statement reports to give you business insights and help your store grow.

Use BizKit POS to Simplify Your Small Business Accounting 

Whether it’s bookkeeping or financial analytics, use BizKit POS to simplify your small business accounting. Get comprehensive and detailed reports of your sales, stock, expenses, taxes, financial statements and more with the Bizkit POS business reports feature. Use the BizKit POS expense management feature to get a full picture of your business expenditure to always know how much it costs to run your business and where your money is being spent. Streamline your billing process with BizKit invoicing. Manage all your collections in one place by tracking funds easily and conveniently while managing your digital wallet in real time with the BizKit payments feature. And use the BizKit Inventory management features to manage your stock and inventory items easily. 

Try BizKit for free or download BizKit in the Play Store or App Store to get started.