It's exciting to parlay your website and graphic design skills into a small business. However, being a good graphic designer or webmaster doesn’t automatically mean that your business will be successful. Success will depend in part on your ability to manage bookkeeping for website & graphic design companies.
Why is Bookkeeping and Accounting for Website & Graphic Design Companies So Important?
Keeping your finances in line keeps your business financially healthy. Bookkeeping for website and graphic design companies creating a budget, making financially sound business decisions, preparing for tax season, and tracking the overall growth of your design firm.
There are some basic terms used in accounting for website & graphic design companies that business owners do well to understand.
- Income statement- This shows you how much money you earned and how much money you have spent during a particular accounting period. A CPA for website & graphic design companies will use the income statement to see how profitable a business is. An income statement will probably include
- Total revenue- The amount of money a business made.
- Cost of Goods Sold- The direct cost to provide your design service.
- Gross Profit- Your revenue after the cost of goods sold is subtracted.
- Selling and Administrative Expense– Things like rent and utilities.
- Depreciation- The declining value of assets.
- Operating Profit- Profit from your design operations only.
- Earnings before Taxes.
- Small Business Tax- This varies based on your business structure.
- Dividends- What you might pay to shareholders.
- Net Income- Your final income.
What an accountant for website and graphic design companies includes on an income statement will vary based on the liabilities, assets, and business structure of the design firm.
This document shows business assets, shareholder equity, and liabilities. It lays out how much your website and graphic design company owes to others and how much has been invested in by shareholders. Assets and liabilities are put in two different sections. Assets = liabilities + shareholders’ equity.
Cash Flow Statement
A cash flow statement shows a CPA for website and graphic design companies how much money is coming in and going out of the business. It shows how well a business is doing at paying off their debts and keeping their operation funded.
Bookkeeping and accounting for website and graphic design companies can become confusing quickly. Here are some tips that can help.
Keep Personal and Business Expenses Separate
When you speak to an accountant for website and graphic design companies, the biggest complaint they have is that small business owners mix their personal finances and business funds together. This muddles how well a business is performing financially and can make tax planning for website & graphic design companies a nightmare.
Choose An Accounting Method
When preparing your financial statements, you have two options.
- Cash Basis Accounting- Revenue and expenses are recorded once the money is collected or spent.
- Accrual Basis Accounting- Revenue and expenses are recorded when they are incurred. It doesn’t matter when the cash exchanges hands.
For owners new to the accounting world, learning the various accounting methods and best practices are a wake up call. For this reason, our team of knowledgable accountants are here to help. If you find this information to be challenging to grasp we can help you make sense of financial statements, layout tax planning strategies, understand general accounting, and help you plan for your company's financial future. Here at Fusion CPA we offer, full range financial management services for business owners just like yourself. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
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