BRC Outsourced Accounting and Advisory Partner Mike Pitney recently presented to a group of entrepreneurs through the Cary Chamber of Commerce, sharing key accounting essentials every small business owner should understand. Here are the takeaways:
Why Accounting Matters More Than You Think
Strong accounting isn’t just about compliance. It’s about clarity, confidence, and smarter decision‑making. When done well, it helps business owners track performance, understand cash flow, maintain credibility with lenders and investors, and make informed strategic decisions. Without reliable accounting, even profitable businesses can struggle with cash shortages, tax surprises, or missed growth opportunities.
The Building Blocks of Small Business Accounting
1. Bookkeeping
Accurate bookkeeping is the foundation of everything else. Recording transactions consistently improves cash flow visibility, supports tax preparedness, and helps catch errors or fraud early. Most small businesses start with cash‑basis accounting and use cloud‑based tools like QuickBooks Online or Xero. As complexity grows, outsourced accounting or working with a CPA can free up time and improve accuracy.
2. Financial Statements
Every business owner should understand three core financial statements:
- Profit & Loss Statement (P&L): Shows revenue, expenses, and profitability over time.
- Balance Sheet: Provides a snapshot of assets, liabilities, and equity—often required by lenders.
- Cash Flow Statement: Explains how cash moves through the business and why profit doesn’t always equal cash.
Together, these reports tell the story of your business’s financial health.
3. Cash Flow Management
Cash flow is one of the most common pain points for small businesses. Late customer payments, expenses due before revenue is collected, seasonal income, rapid growth, and unexpected costs can all create pressure. Monitoring cash regularly, invoicing promptly, managing payment timing, and forecasting ahead help reduce stress and avoid surprises.
Tracking the Right Metrics
Key performance indicators like revenue, gross margin, net profit, EBITDA, current ratio, working capital, accounts receivable aging, and accounts payable aging provide insight into performance and liquidity. For startups, burn rate and runway are especially important. Reliable accounting systems ensure these metrics are accurate and actionable.
Internal Controls Protect Your Business
Internal controls are policies and procedures that safeguard assets and ensure accurate financial reporting. Simple practices, such as separating duties, reconciling accounts monthly, requiring approvals for key transactions, and limiting system access, can significantly reduce the risk of fraud or errors, even in small organizations.
Common Mistakes to Avoid
Two issues consistently create problems for small businesses:
- Mixing personal and business finances, which complicates bookkeeping and increases legal and tax risk.
- Inconsistent recordkeeping, which leads to inaccurate financial statements and tax headaches.
Dedicated business accounts, routine bookkeeping, and organized documentation go a long way toward avoiding both.
Understanding Tax Obligations
Tax compliance goes beyond filing an annual return. Business owners must understand which taxes apply to them (income, payroll, sales, and more) and stay on top of registrations, deadlines, and estimated payments. Choosing the right legal entity (such as an LLC or S‑Corporation) also affects taxes, liability, and long‑term flexibility. Working with a CPA helps ensure compliance while planning ahead to manage cash flow and reduce surprises.
Using Technology to Work Smarter
Modern accounting relies on connected systems. Accounting software, bill pay platforms, CRM systems, POS tools, and inventory programs can streamline operations, reduce errors, and provide better visibility. The key is integration, making sure systems talk to each other so financial data is accurate and timely.
When to Seek Advisory Support
As businesses grow, many outgrow owner‑handled accounting. Options range from in‑house staff to outsourced accounting teams or fractional CFO/Controller support. The right choice depends on size, complexity, and strategic needs, but having experienced advisors involved often leads to better insights, stronger controls, and more confident decision‑making.
Click here to learn more about BRC’s Outsourced Accounting & Advisory Services.