Bookkeepers and accountants for small businesses have been an essential part of the business world for decades with its early development dating back to as far as ancient Mesopotamian times. To truly understand the impact that accounting has had on the progress of money and the economy, it’s important to know what its roots are. This short article will explore the origins of accounting and how accountants for small businesses have come to play such a fundamental role in the success of many startups.
How Did Accounting Originate?
Before we delve into the history of small business accountants, let’s discuss the emergence of accounting. For as long as concepts such as counting, money and writing have helped develop civilizations, so has accounting. Some of the earliest recorded findings of the inception of accounting are said to have originated from ancient Mesopotamia.
Documents containing financial details such as the transaction of goods and expenditures showcase the use of accounting as long as 7000 years ago. Accounting first developed during this period out of a need to record and track the exchange of goods as well as taxation relating to Mesopotamian temples.
While the roots of accounting can be traced back to this era, the basics of accounting that we know today was officially invented during the late 1400s in Italy by Luca Pacioli. Much of the foundation of the accounting structure still used today was created by Pacioli, due especially to his invention of the financial statement. Balance sheets were created to help merchants gain a better understanding of their expenses and income.
As the rest of the world began to shift and change due to European colonisation, accounting made its way to America and further developed over time. While bookkeeping, sometimes referred to as accounting, was being used by bookkeepers that did financial work for small business owners. However, accountants for small businesses were not yet hired by business employers as the enterprises during the 1800s were small enough that owners could manage even the more complex accounting work.
The growth of the economy leads to the push of many corporations expanding their businesses. Financial documents like income statements and balance sheets were made available to the public as proof of their money-making abilities, which helped to entice potential investors. The emergence of shareholders created a demand for official accountants to manage the finances of these corporations. As this demand grew, so came the creation of the American Association of Public Accountants (AAPA) during the late 1880s.
The Invention Double-Entry Bookkeeping
When it comes to the emergence of accountants for small businesses, double-entry bookkeeping plays a pivotal role. For centuries, one of the most important ways a business could achieve success was through having a thorough understanding of their financial health as well as having those finances balanced. Double-entry bookkeeping was developed to not only record money coming in and out of the business, but also to guarantee the accuracy of these records and prevent money from being lost or stolen.
The use of double-entry bookkeeping was first commercially used around the 1300s in France, with even earlier recorded use found in Korea in the 11th century. While the exact period in which this form of bookkeeping was created is not clear, it is certain that its emergence was impactful for early entrepreneurs. Double-entry bookkeeping revolutionised accounting and developed the need for accountants for small businesses. Here are some areas that this form of bookkeeping helped business owners to comprehend:
Spot Potential Financial Dangers: Now that employers were able to view the basic financial health of their business, accountants and bookkeepers could point out any risks and areas that could hinder the business’s finances. Additionally, accountants for small businesses were also able to help owners mitigate these risks to avoid any money being lost.
View Their Financial Status: Being a successful entrepreneur and running your own business is dependent on earning enough money. For business owners to ensure that they’re generating a good profit, they need to have a clear understanding of the financial status of their business. The layout of double-entry bookkeeping allowed for owners to see if they were gaining money or losing it in a way that was easy for them to understand.
Effectively Use Resources: Acquiring resources for your business means nothing if you’re not using them effectively. During this time, bookkeepers showed enterprise owners how to use newly acquired resources in a way that helped the business to earn more. Whether it was new equipment or goods for trading, owners were now able use these resources in an effective way.
Understand Their Return On Investment (ROI): ROI’s are important as they indicate what profit is being earned, or lost, based on previous investments made by the owner. Double-entry bookkeeping helps owners to gauge whether their investments were worthy purchases or not based on the money it profits for or costs the business.
Small Business Accounting Today
Because of the emergence of double-entry bookkeeping, accountants for small businesses have been beneficial to startups and entrepreneurs for centuries. When it comes to recording assets and tracking money coming in and out of the company, not much has changed regarding the role of accountants for small businesses.
The development of technology, however, has allowed for small business accounting to become more efficient, secure and advanced. What once relied solely on the writing of records in physical general ledgers and cash receipt journals evolved into computer software and cloud-based accounting. With software accounting, outsourced bookkeepers are now able to record financial data faster than ever before with more accuracy.
Additionally, the advancement of accounting technology has also allowed owners to access new information for their business, such as financial analyses and reports specifically tailored to your needs.
As the technology we have integrated into our daily lives continues to evolve, so does the world of accounting. Accounting technology around the world is continuously adapting to not only integrate new trends, but also become more accessible. The development of cloud-based accounting has allowed for accountants and business owners alike to view the status of their financial data from any and all synced devices at any given point.
Why Are Accountants For Small Businesses Important?
Today, accountants for small businesses provide great value in the working world, especially for entrepreneurs. Running your own business comes with a great deal of time, effort and money, which is why outsourcing an accountant to handle all the tedious financial work can do wonders for your startup’s growth. Below are some of the ways in which accountants for small businesses can add value to your enterprise:
Help Raise Your Business’s Capital:
Resources go a long way for any entrepreneur or startup business, especially in the infancy of your company. Many owners take out loans from the bank to gather capital for their small business, but this is impossible to accomplish without the proper financial documentation. A small business accountant can prepare your financial statements and other relevant data for you so that you are eligible for a loan.
This also applies for potential investors that may be interested in helping to grow your business but need to confirm your financial credibility. Accountants for small businesses help to increase the capital of your startup which, in turn, can help you earn more profit.
Ensure Accountability:
One of the most important ways to ensure the success of any entrepreneur or small business is through regulating all the financial records of the company. Losing, damaging or incorrectly recording documents like invoices, financial statements or balance sheets can make it easy for money to be mismanaged or lost. Without the proper regulation and accountability of the financial data of your business, fraud can be committed without traceability.
An outsourced accountant, however, is hired to manage, record and organise all the finances of your company, ensuring security for you and your business’s funds. Additionally, accounting is a tedious and complex job to take on without the proper training, which is why you’ll be able to avoid errors in your company’s financial data and can confirm the accuracy of those records.
Track The Progress Of Your Business:
The financial data of your company will give you a true assessment of how well your business is doing. Knowing and understanding your company’s financial health will inform you on making important decisions for the business, such as investing in resources or cutting back on costs. With the help of a small business accountant, you’ll be able to view and measure the progress of your business in the form of a financial statement.
Financial statements are especially useful for small business owners as they showcase how well the business is performing based on financial activities. Additionally, these statements help owners to compare the financial progress of their business throughout the years.
Saves You Time:
Because small businesses have fewer resources to start with than large enterprises, entrepreneurs and owners must make the most of what they have, whether it be money or time. Small business owners have many responsibilities when it comes to running a company on their own, which is why it’s important for them to allocate their time wisely.
Without an outsourced accountant, owners are tasked with handling tedious financial work, taking away time from addressing other pressing issues in the business. Hiring an accountant is a worthy investment as it allows you to dedicate your time and resources to running the business without having to worry about being your own accountant. This also allows owners and entrepreneurs more time to focus on expanding their business.
Generate Budget Projections:
One vital role that outsourced accountants provide for small business owners is creating budget projections. Small businesses that are committed to expanding their business benefit greatly from budget projections as they predict future financial outcomes for the company. Budget projections take the company’s existing financial data and use it to calculate where the business is headed in the short and long-term future.
These budgets are especially valuable as they can help owners to better plan the success of their business as well as prepare for future expenses. Small business accountants ensure that funds within the business are properly distributed and in accordance with their budget projections.
SureBooks: Continuing Accountancy History
In this article we have examined a small part of the history of accounting, and investigated some of the major developments that contributed towards the accounting system as we know it today.
At SureBooks we are proud to be a part of this history, and in our own way continue to push the industry forward with our specialised services catering to small businesses. So if you are looking for a trustworthy accounting service that can help you get your books in order, call us today and let us help you with all your financial needs.
