Starting a new business can be a little overwhelming so it is a good idea to keep in mind a few essential accounting tips. If you don't keep an eye on business finances and leave it to someone, you might end up with no business after a few years. Cash Flow issues can arise, and you need to be smart about your business growth.
Here in this article, we will be sharing 10 essential accounting tips for startups, so, if you recently launched a startup, you must read this article.
1. Know about business taxes
Running a business is not an ordinary thing. There are a few rules that are applied to your business. They are different from your usual financial management system. Let's say you don't have to pay a tax on your pocket money, but in business, you will have to pay a tax and in return, you will be entitled to some business advantages. Other things like, why you need to file for taxes, how tax is determined according to your net income and business size, how to determine between a personal and business tax, and how should you prepare before the tax season? These are all the questions that you must know during the startup launch. Financial management laws must be applied to business accounts because it is the way of good bookkeeping.
2. Keeping your Personal and Business Expenses Separate
So many people make the mistake of mixing personal and expenses, but it is a grave mistake. You are bound to get in trouble if you don't keep your business and personal life separate. Personal losses are not supposed to be big, and they don't impact us in a larger capacity but if you take money from a business account to offer a paystub to your personal housekeeper, it can have a negative impact on business.
The best way to keep them separate is to have a separate bank account for personal and business expenses.
3. Keep a record of your Expenses
We all like to spend thousands of dollars on shopping whether it is for personal use or for inventory. And when we are in the thick of it, we lose track of our budget and end up spending more than we wanted. This has been a problem for my startup owners. But our recommendation is to save money from small things such as stationery, office furniture, and buying less inventory. Being the owner of your startup company, you should keep a close eye on your expenses and don't forget to add them to a list of expenses. Because not keeping a record is even worse than overspending.
Make sure you have a plan on how you are going to save from mere expenses because unless you are careful, your high income skills and smart business plan can fail.
4. Bookkeeping/Accounting Software
Back in the day, people used to make a list of expenses but now everything is replaced with digital technology. These days you can have accounting software for your business setup. By having software laced with cutting-edge technology, you don't need to keep receipts anymore because all the data will be saved there.
You can have a business credit card to pay for your transactions as it will be easy to handle instead of cash in your wallet.
Also, the proper record of expenses and profits will give you an insight into how you want to handle the next step of your business.
A lot of big companies get cloud-based accounting software to keep their data safe but unless you are spending millions, you should lay low and get less expensive accounting software. Even with the less price, don't compromise on quality. QuickBooks is a good one. With this, you have access to it anywhere and anytime. It has a smooth collaboration between your employees and secures your data through automatic backups.
Accounting software will require a link to your business bank account. Once it is synced with the bank, it will start tracking your income and expenses. It will generate automatic receipts and keep track of invoices.
5. Hire a Professional
Doing bookkeeping is a crucial matter for every business and it is okay if you want to do the task all by yourself. But not everyone is able to do it herself or himself. Either they are not good with numbers, or they don't have time to manage these things. That is also fine because it is not necessary that you should be good at everything. With experience and a little learning, you can get better at doing bookkeeping. Also, the software is really good as well and they can help you out.
But besides handling it all by yourself, you can hire a professional financial accountant. A financial accountant knows what to do and how to manage the whole business. However, hiring them is pretty expensive so hiring them for a few hours or taking their services in weeks or months can also be considered. They can be pretty helpful for filing taxes at the right time. Saving money by finding a few loopholes in the system, and employee compliance.
6. Managing employees' salary
When you are running a business, you definitely have a few people working for you. They are regarded as your employees. In exchange for their services, you need to pay them. Paying them will take away a big chunk of net income. But you need to be smart while hiring people. Hire people that are smart and are functional for your business. Lose the dead weight of those employees who don't do much for the business. Also, if they work overtime or on the weekends, you need to pay them handsomely as well.
7. Always have some cash on the side for a rainy day
You must be aware of the phrase "better safe than sorry" and keeping some cash on the side for a rainy day is exactly like that. You never know when there will be a cash crisis so prepare in advance.
8. Don't take big loans
Many businesses consider taking big loans as an immediate solution, but we urge you to take out only what you need. Don't go the extra mile when you are under crisis because it wouldn't be wise.
9. Plan ahead of any major investments
Surely, with a business plan, you have thought about the future. But it is wise to keep those goals in mind when you are spending money on the basics.
10. Keep your financial statement UpToDate
When you are making decisions for the future of your company, you must know the company's current, previous, and projected growth. This can be done if you keep your financial statements UpToDate.