Where Business Growth Begins: Understanding Full-Cycle Accounting

Michael Pignatelli
Mar 25, 2022

Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.

Many business owners believe that growth begins with acquiring new customers, implementing marketing strategies, or sales initiatives. However, the success you want for your business doesn't stop there. To lay the groundwork for long-term success, you also need to consider the starting point for all businesses: full-cycle accounting.

While this may sound like a lot of work for you, understanding accounting provides insight into all aspects of your business, from start to finish. Furthermore, this financial procedure enables you to make well-informed options that will propel your business forward.

With this information in hand, you'll be able to familiarize yourself with this critical aspect and brush up on some decisions about where to focus your energy and resources to be able to run a successful business. So, if you're determined to elevate your business to new heights, start with full-cycle accounting.

What Full-Cycle Accounting Entails

Full-cycle accounting is the key to understanding where your business stands financially in the broadest possible terms. It is defined as the process of documenting, classifying, and summarizing monetary transactions in order to provide data that may be used in business decision-making.

No business can survive without revenues, and no revenues can generate without accounting. Of course, it's a little more complicated in reality, but the full-accounting cycle can bring everything out in the simplest way.

Streamline Your Accounting Activities with These 8 Steps

infographic of full cycle accounting

We'll take you through the eight steps of the full accounting cycle, so you can get a better understanding of how to manage your business finances.

  • Identifying and Tracking Your Transactions: This is the first and most essential step because if you don't identify your business transactions correctly, the rest of the steps will be incorrect. For example, if an Amazon seller doesn’t record a sale, their total revenue for that month will be off by however much that sale was worth. 
  • Recording Transactions in a Journal: This financial record will help you stay organized and efficient to ensure that you're keeping up with your bookkeeping. Luckily, it's a lot easier now to manage records in one place with the help of journal entry software available on the internet.
  • Posting Transactions to General Ledger: This process is used to track how much money you've made from your sales and ensure that your books are balanced.
  • Preparing the Trial Balance: Assuming you've already set up your chart of accounts, it's time to create a trial balance. This phase lists all of your accounts and balances at a given point in time, usually during the completion of an income statement.
  • Analyzing Worksheets: After you prepare the balance transaction, it's time to hunt for errors and make appropriate debit and credit adjustments through the worksheet. 
  • Adjusting Journal Entries: Similar to balancing debit and credit, adjusting entries is one of the last steps needed before creating an income summary. This process lets you correct accrual/deferral concerns, ensure accurate financial reporting, and keep your transactions in order.
  • Creating Financial Statements: Financial statements reveal how much funds are flowing in and out of the business. But you don't need to worry, there are available reporting programs like Xero and Sage 50Cloud that can help you make budgeting and strategic decisions for your business. 
  • Closing the Books: This ensures that the data entered into the accounting system is exact, allowing financial transactions to be prepared and validated. With proper technique, you can easily manage your revenue and stay on top of your business's bottom line.

Managing Full-Cycle Accounting

You don't need to feel like you're swimming in paperwork to optimize your business. You can successfully manage the accounting life cycle and keep your business finances on track with the right steps. Here’s how:

  • Know your deadlines: As a good business owner, you need to comprehend the entire process of the accounting cycle. From there, you can pinpoint when certain deadlines fall. This practice is recommended to avoid scrambling to get everything in order.
  • Resolve numbers quickly: Unexpected bills or missing payments are only some of the problems that will arise during the accounting process. When this happens, resolving numbers should be done quickly so that you can get back to business as usual.
  • Find the dream team: There's one thing we know for sure: bookkeeping is not for the faint of heart. It's hard to keep track of all the incoming and outgoing cash, not to mention tracking inventory levels and sales tax. But don't worry, there are plenty of experts who can help you with that—accountants and bookkeepers are the most important.
  • Invest in accounting software: Accounting software has revolutionized the accounting life cycle. The software makes it easier and faster for businesses to keep track of their finances by automating the process and taking care of all the different aspects of the accounting period.

So don't let the accounting blues get you down. Follow these tips and take control of your financial future!

Improve Your Financial Health with Comprehensive Accounting

It's inevitable to feel overwhelmed with the thought of accounting. But, on the contrary, financial accounting is quite manageable with the right devices and methods. Moreover, once you get it, you'll find that full-cycle accounting is invaluable for making sound business decisions and achieving long-term success.

We hope that this post encourages you to comprehend the basics of full-cycle accounting and acknowledge the right way of implementing these accounting concepts. Be sure to check our other financial articles for more tips on maintaining a successful business.

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228 Park Ave S #82849
New York, NY 10003
United States
7676 Woodbine Ave #2
Markham, ON L3R 2N2
Canada
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Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting.. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.

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