FAQs
Everything you need to know before you get started
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Helpful FAQs to Support Your Decision
What is the difference between cash accounting and accrual accounting?
Cash accounting records income and expenses when they are actually received or paid. Accrual accounting records income when it is earned and expenses when they are incurred, regardless of when cash is exchanged. Accrual accounting
gives a more accurate picture of financial performance.
What’s the difference between profit and cash flow?
Profit is the amount of money left after all expenses have been deducted from revenue. Cash flow is the movement of money in and out of your business. A business can be profitable but still have cash flow problems if payments aren’t aligned with income.
What expenses can I deduct as a small business?
Common deductible expenses include office supplies, rent, utilities, marketing, travel expenses, professional services (like accounting), and even certain home office expenses. It’s important to keep accurate records to support these deductions.
How can I improve my cash flow?
To improve cash flow, consider invoicing promptly, following up on overdue payments, negotiating better payment terms with suppliers, and managing inventory more efficiently. Regularly reviewing your financial reports can also help you spot potential cash flow issues early.
What is a balance sheet, and why is it important?
A balance sheet shows your company’s financial position at a specific point in time. It lists assets, liabilities, and equity. It’s important because it helps you understand your business’s financial health, liquidity, and ability to meet obligations.
What is working capital, and why does it matter?
Working capital is the difference between your current assets and current liabilities. It measures your business’s ability to pay its short-term obligations. Positive working capital means you have enough assets to cover debts and continue operating Smoothly.
What is depreciation, and how does it affect my taxes?
Depreciation is the allocation of the cost of a tangible asset over its useful life. Depreciating assets can reduce your taxable income, as it’s considered a business expense. However, the rules for depreciation can be complex, so it’s wise to consult with an accountant.
How can I reduce my tax liability?
To reduce your tax liability, you can take advantage of tax deductions, credits, and benefits. Ensure you’re claiming all eligible expenses, considering depreciation of assets, and using tax-efficient strategies like salary packaging or investing in tax-
deferred retirement funds.
Why is budgeting important for my business?
A budget helps you plan for future income and expenses, allowing you to allocate resources effectively. It helps set financial goals, track performance, and avoid overspending, leading to better financial control.