As a business that deals in candle production, one may possess the capability to execute duties such as tax compliance, financial management, and invoice preparation. Nevertheless, when dealing with a substantial volume of sales, it would be astute to engage the services of a certified accountant to handle these affairs.
Undertaking such a responsibility alone can be an onerous task; thus, it would be judicious to secure the services of a proficient accounting firm.
Recent studies have found that employing proper accounting practices can result in substantial financial savings for candle businesses. This practice can significantly enhance efficiency and accuracy, which is of utmost importance in today’s rapidly evolving society.
This article will tell you about the different options available to candle business and the associated costs.
What is accounting for candle business?
The process of accounting encompasses the recording and summarization of financial information to ensure that a company maintains financial stability and compliance with accounting regulations.
It involves various tasks, such as monitoring expenses, preparing tax returns, and validating the accuracy of financial statements.
For small business owners, having a fundamental knowledge of bookkeeping and accounting is crucial. Nevertheless, they may lack the financial expertise required to make well-informed decisions, which are vital to their business’s success.
This can create difficulties in effectively allocating funds and managing their finances efficiently.
By investing their time and resources in accounting practices, small business owners can acquire a comprehensive understanding of their financial position, enabling them to make informed decisions and ensure their business’s long-term success.
Adequate accounting practices can help identify areas for improvement, identify financial irregularities, and guarantee compliance with financial regulations. Moreover, it can provide valuable insights into a business’s financial health and help plan for future growth and expansion.
How to do accounting for candle business in 7 steps
We’ll walk you through each step to understand the basic accounting procedures to manage your finance properly.
Find the most suitable accounting software
Accountancy software provides an extensive range of functionalities that can assist with multiple accountancy tasks, such as documenting transactions, processing invoices and bills, creating financial statements, and producing charts to visually represent your business’s finances.
This tool not only simplifies your accountancy tasks but also provides several advantages to your business.
Based on recent research, companies utilizing accountancy software are more profitable and exhibit superior cash flow compared to those that don’t.
Furthermore, this tool has the potential to reduce time spent on accountancy duties by up to 34%, enabling you to allocate more time to other critical business aspects.
We comprehend that every business has individual requirements, which is why we have conducted thorough research and assembled a list of options specifically designed for the candle business.
These features are custom-made to address the candle business’s needs and we are confident that they can significantly aid you in managing your finances with efficiency.
Record entries in your software
Modern accounting software is designed to handle all the complex calculations and generate financial statements that present a comprehensive overview of your business’s financial wellbeing.
In order to streamline your accounting process and reduce the workload, it is crucial to configure the software to handle recurring expenses such as rent and employee salaries. This will eliminate the need for manual input of the same amounts each month. Furthermore, generating invoices for each client will help you keep track of your revenue and ensure prompt payments.
One of the greatest advantages of using accounting software is the ability to visualize your business’s financial status through an informative chart. This chart offers invaluable insights into your income and expenses, empowering you to make data-driven decisions about the future of your business.
Record Cost Of Goods Sold (COGS)
For businesses that deal with inventory, calculating COGS or “cost of goods sold” is a critical metric. It’s not merely a matter of adding up the initial cost of the items sold; additional expenses like shipping and handling must also be factored in.
COGS takes into account all the expenses associated with selling inventory, providing a more accurate portrayal of a company’s financial performance. This information enables businesses to make well-informed decisions about pricing, sales strategies, and inventory management.
When adding products and services to the accounting system, the system automatically computes COGS based on created invoices.
This feature enables businesses to keep track of costs, make data-driven decisions, and increase profitability.
Therefore, monitoring COGS is not only essential for good bookkeeping but also for making sound business decisions.
Make a chart of accounts for proper bookkeeping
Managing finances for a candle business requires careful attention to detail, and creating a comprehensive chart of accounts is a critical component of this process.
By systematically tracking income and expenses, a candle business can make informed decisions about its financial health and future growth prospects.
A chart of accounts provides a clear overview of a candle business’s financial position, enabling easy identification of expenses related to rent, salaries, and other costs.
Additionally, it allows a candle business to track its revenue streams, including income from classes and workshops, and to monitor expenditures related to purchasing equipment and supplies.
A well-constructed chart of accounts for a candle business might also include information on assets such as candle mats and props, as well as any surplus funds.
By maintaining an up-to-date and accurate chart of accounts, a candle business can make informed decisions about distributing profits, whether by allocating them to shareholders as equity or retaining them for future use.
Automate the accounting process to save time
Streamlining accounting processes through automation can significantly reduce the amount of time and effort required for tasks such as account reconciliation, salary payments, and invoice issuance. This can lead to significant benefits for businesses by allowing them to allocate resources to other important areas.
For instance, implementing automation tools such as invoice processing software can yield substantial time savings for businesses.
This software has the capability to automate the entire invoice processing workflow, from receipt of invoices to their validation, approval, and payment. As a result, businesses can save up to 50% of the time it would take to process invoices manually.
By embracing automation in accounting processes, businesses can improve their overall efficiency, reduce the risk of errors, and enhance financial visibility.
These benefits can lead to better decision-making and resource allocation, which can help drive growth and profitability.
Hire an accountant
If you are a business owner, you may have a lot on your plate. Keeping your finances in order may not always be a top priority.
However, accurate and organized finances are crucial for the success of any business. That’s where an accountant comes in.
Hiring an accountant can provide significant benefits for your business. Not only can they assist with setting up automated processes to manage your finances, but they can also ensure that your finances are accurate and up-to-date.
By doing so, you can avoid any potential fines or penalties for mistakes or oversights.
Even if you have a basic understanding of accounting, it’s worth considering hiring an accountant if you don’t have the time to manage your finances yourself.
They can provide expert guidance on tax laws, help you make informed financial decisions, and offer solutions to any financial challenges your business may face.
Best accounting agencies for candle business
Here are some good accounting firms you might want to consider.
1-800 Accounting Agency
1-800Accountant is an accounting agency based in New York. 1-800Accountant specializes in working with small businesses. It offers services starting from $0 to $375/month, which is quite affordable.
Accotax Accounting Agency
Accotax is an accounting agency based in London that works internationally with small businesses, partnerships, and other business types. Accotax’s pricing is perfect for startups and self-employed as it ranges from $265 to $600/month on average.
It has a 4.9-star rating on Google My Business, a 4.7-star rating on Facebook, and a 4.9-star rating on Trust Index.
Best 5 accounting tips for candle business
1-Use accrual-based accounting to record transactions
2-Understand basic tax requirements
3-Keep your business bills
4-Reconcile your transactions
5-Create a business bank account
Use accrual-based accounting to record transactions
Accrual-based bookkeeping is a financial accounting method that records a company’s income and expenses at the time of occurrence, regardless of when the payment is received or made.
This system enables companies to have a more accurate overview of their financial performance over a prolonged period.
By adopting the principles of accrual-based accounting, companies can accurately determine their earnings and expenses over time.
This allows them to make informed and realistic forecasts, taking into account that they may need to pay bills sooner than anticipated, particularly those related to expenses.
As a result, the auditing process plays a crucial role in ensuring that a company’s financial statements are accurate and comply with the Generally Accepted Accounting Principles (GAAP).
This consistency across the industry is essential to compare financial performance with other businesses.
Understand basic tax requirements
When it comes to filing your taxes, it is vital to be aware of the necessary forms and to maximize any deductions or credits that can reduce the amount of tax you owe. For businesses, the 1120S and 990T forms are typically used to report income and expenses.
There are a plethora of deductions that individuals can claim on their taxes, such as mortgage interest payments, charitable donations, and medical expenses.
Meanwhile, credits provide an excellent opportunity to lower the tax bill and act as incentives for spending in specific areas. Some popular credits include those for child care costs, earned income, and student loan interest deductions.
It is crucial to report all sources of taxable income accurately, including wages, self-employment earnings, investment dividends, and capital gains or losses. Failure to do so may lead to underpayment penalties if the IRS audits you in the future.
Moreover, it is important to remember that every state has its own tax laws and filing deadlines, which may vary from the federal tax deadline of April 17.
Therefore, it is essential to review your state’s regulations and be aware of any special tax rules that apply to your specific circumstances. Investing time in understanding tax laws and regulations can help you minimize your tax liability and avoid potential penalties.
Keep your business bills
Managing bills effectively can be a daunting task, but implementing a reliable system can ensure seamless business operations.
One efficient way to manage your financial affairs is to establish an online payment system, which enables quick and convenient bill payments. Melio is an exceptional example of such a system as it streamlines the payment process.
By using online payment systems, you can ensure timely payments, avoiding late fees and interest charges that can accrue due to delayed payments.
Moreover, setting up payment reminders can help you stay on top of your bills and prevent you from missing any payment deadlines. Automating your payments is also a great way to save substantial amounts of time and money in the long run.
Reconcile your transactions
The process of ensuring the accuracy and currency of accounting transactions through reconciling financial records is of utmost importance. It helps detect and resolve discrepancies and errors before they evolve into bigger issues.
Reconciling a debt requires the collection of all relevant documents such as bank statements, invoices, and receipts. This minimizes any discrepancies between the actual amount spent on goods or services and the amount owed.
The next step involves entering each transaction into the online banking feature. This feature will automatically download the relevant transactions from the bank account.
Then, each transaction must be compared against its associated paper trail documentation, such as invoices and receipts, to ensure that they are consistent and accurate.
Create a business bank account
Establishing a dedicated business bank account is crucial for any business owner to effectively manage their finances.
This helps in keeping a record of income and expenses, ensuring that taxes are paid appropriately. Furthermore, having a separate account provides financial transparency, which aids in comprehending the financial health of the business.
In addition to a separate bank account, obtaining an insurance policy is vital to protect the company from any financial liabilities that may arise due to any unfortunate events. However, before opening a business bank account, there are a few essential steps to consider.
Firstly, determining the type of business entity to register, such as a sole proprietorship, partnership, or corporation, is crucial. After that, researching different banks to find the one that best suits the business needs are necessary.
Once the bank is selected, gathering all the required documentation, including articles of incorporation or DBA forms, and proof of identity, is important to open the account. Finally, to activate the account, making an initial deposit into the new account is mandatory.
Fortunately, setting up a dedicated banking solution for small businesses is a relatively simple process that does not require any complicated procedures.
Taking this step ensures that all business funds are accurately tracked, preventing any potential legal issues in the future.
Accounting for candle business FAQ
How often should I review my books and financial records, so they stay accurate and up-to-date?
It is highly recommended that you conduct periodic reviews of your financial records to ensure their accuracy and completeness.
This involves a monthly review of financial statements, balance sheets, cash flow statements, and other relevant documents.
It is of utmost importance to ensure that all transactions are recorded accurately to reflect the correct information in reports such as profit and loss statements or accounts receivable/payable summaries. This will help in avoiding any discrepancies in the financial records of your business.
If your business experiences frequent changes, it may be necessary to conduct more frequent reviews to ensure that all aspects are up to par. For instance, in the case of significant fluctuations in revenue from one month to another, such as seasonality, it would be beneficial to conduct weekly reviews.
By conducting these reviews, you will be able to track changes more precisely over time, helping you determine the taxes you need to pay accurately while running your business efficiently.
What taxes do I need to pay as a candle business?
As a candle business, you will need to pay taxes such as sales tax, employer payroll tax, and more. It’s always a good idea to consult with an accountant who will be able to understand specific requirements depending on your state’s laws.
Regular bookkeeping monitoring helps businesses stay compliant with regulations and maintain track of their overall success metrics.