When starting a new business, it’s critical to get the foundation right. Your journey as a business owner will be much smoother and simpler if you start off on the right track with your finances and accounting.
But of course, during this exciting and challenging time in your entrepreneurial journey, accounting is probably the last thing you really want to think about. Furthermore, you may be struggling to know where to begin.
That’s why we’ve put together this blog post with five key accounting tips to help you get your new business off on the right track.
Step #1 – Open a Business Bank Account
One of the very first things you should do when starting a new business is to open up a separate bank account for your company. This will help you to keep better track of your finances and avoid personal and business expenses from becoming confused.
Mixing your personal and business finances is a big mistake because it makes it much more difficult to track your expenses and income, manage your cash flow, and prepare your financial statements. So open up a business bank account as soon as possible after starting your company and ensure that your records are crystal clear from the get-go.
#2 – Track Your Expenses – Even Before You Launch
Another important accounting tip for new business owners is to start tracking their expenses even before they launch their company. This will give you a good idea of what your overhead costs will be once you’re up and running. You may also be able to deduct some of these expenses from your tax bill, too.
The best way to track your expenses is by using accounting software like Xero, QuickBooks or FreshBooks. Keep track of all your expenses, including things like office supplies, marketing materials, website costs, and any professional services you may need to help get your business off the ground.
#3 – Hire an Accountant or Bookkeeper
Hiring an accountant or bookkeeper is one of the best things you can do for your new business. It pays to have a great accountant or bookkeeper on side before you launch, so don’t delay this decision. They will be able to help you set up your systems, track your expenses, prepare your financial statements, and ensure that you choose the right structure for your business.
If you don’t have the budget to hire someone full-time, you can outsource your accounting and bookkeeping needs to a part-time or virtual accountant. This is a great way to get the expertise and support you need without breaking the bank.
However, do be wary that “accountant” is an unregulated term, which means that any old cowboy can claim the title! Be sure to look for a professional with respected accounting qualifications and plenty of testimonials. Dirt cheap prices are usually a warning sign.
#4 – Set Up a Payroll System
If you’re going to be hiring employees, then you’ll need to set up a payroll system. This will help you to pay your staff on time and accurately, as well as deduct the right amount of taxes.
There are many different payroll software options available, so do some research and choose the one that best suits your needs. Remember, you can always outsource payroll to a trusted accountant!
#5 – Understand Your Tax Obligations
Even if you have an expert accountant handling your tax returns for you, it’s still important to know and understand your tax obligations as a business owner.
The good news is that a great accountant will take the time to ensure that you have a sufficient understanding of your tax situation whilst they handle the technical side of things.
When starting a new business, you need to make sure that you set yourself up for success with solid accounting procedures. When you build your business on a strong financial foundation, the rest of the journey will be significantly easier and more straightforward, and you can focus on the aspects of entrepreneurship that really get you fired up.