Thinking of Starting a small business of your own? There is no dearth of details to be considered at the very start except getting the accounting practices right for your start-up. Effectively tracking the costs, expenses, and revenues will help in weeding out the paperwork and any confusion in cash flow so that you can concentrate on growing your business.
I’ve seen that more often, several start-up owners do away with the accounting and bookkeeping at the start. But how long can it be delayed? When the time of filing tax returns is near, you will be short of ideas on how you will take full advantage of filing your firm's tax return.
Many startup founders believe that managing finances in a startup are an absolute drudgery. If accounting is taken care of from the very beginning, then it is no longer a problem.
Correctly recording the transactions.
Creating a plan with the budget that is realistic and
Reviewing results regularly
Cash flow statements
A Bank Account has to be opened: When the start-up or business has been registered legally, a bank account must be opened. If a business is a sole proprietor, then a bank account is not compulsory but definitely recommended.
Effective tracking of expenditures: For the success of a start-up, all expenses have to be recorded and analyzed accurately for creating financial statements, tax return preparation, and monitoring the overall growth of your business. Take care and analyze when you travel out of the city for business expenses, expenses related to vehicles, entertainment, meals, expenditures on gifts, etc.
Effective bookkeeping system: It is important to record and categorize daily transactions and reconcile bank statements. You can do it yourself or use some software tools for the needful.
Payroll system has to be set up: There are times when even in a small business, people are helping you out. A freelancer can help you create a logo for your company or hire a part-time employee for a specific job, and these people need to be paid. You have to decide at the very beginning if an employee is on a full-time payroll or a part-time or an independent contractor. If your company is working with an independent contractor, you may be required to file Form 1099 at the end of the year.
Learn import rules about tax: There are fees you have to pay when purchasing goods from other countries. These fees are taxes or duties. Check all the rules and regulations well in advance so that you have ethical business practices.
Mode of payments: Determine at the very start how you are going to get paid.
Know your tax liability: According to your business's structure and ownership, tax obligation is determined.
Sales tax procedures have to be established: This has to be done at the very start to avoid confusion of any kind to the buyers. International selling is tax-exempt, but this varies with the state your business is located in.
Gross margin setting up: In the very beginning, the gross margin has to be set.
Methods have to re-evaluate from time to time: You can start with a simple MS Excel tool to record your accounts and gradually shift to a more accurate software tool like QuickBooks, Peachtree, etc. You should constantly be on the look-out for a more appropriate bookkeeping solution. This can be immensely profitable for your business.
You can separate the tasks according to the time they have to be taken care of. The division of tasks can be made as accounting tasks to be taken care of daily, weekly, monthly, and annually.
Cash check: Check how much cash you have at the start of the day for cash is the main thing to run your start-up smoothly. You should know how much cash you will be receiving and how much you have to pay for the coming time.
Create Transaction Records: It is essential to record all the transactions, big or small. Details of cash received, customers billed and vendor payments, etc. Recording manually is a tough job; therefore, this can be done with software tools.
Receipt Records: Receipts of all the cash received or paid should be properly filed and documented. A file for payroll should be created with proper payroll months and bank statements to be easily used at the time of filing tax returns.
Record non-payment: Create a separate folder for unpaid vendors with the amount's details due, due date, and billing dates.
Payment should be made on time: For keeping a healthy relationship with the vendors, make payments on time, and keep the receipts and records filed.
Use Proper invoices: A proper invoice template should be used with all the valid details mentioned to help the future.
Checking Balance: Check your balance each month to check if your cash transactions are accurate and properly documented.
Past-dues should be reviewed: While recording the transactions, you should record them in a way that separates the unpaid bills from the aged bills with proper due dates so that timely reminders can be sent to the vendors accurately and your cash flow is regular.
Status of Inventory: Analysis has to be made according to the inventory status, and products that are selling well have to be separated from the slow-moving ones. There can be changes in the strategies to concentrate on slow-moving goods.
Payroll review: According to taxing and legal requirements, the payrolls have to be reviewed periodically.
Profit and loss review: Compare your actual profit or loss against what you had projected and the budget.
Aging dues: Analyze the past-dues of vendors, decide to write them off, or send them to a collection agency.
Inventory review: Analyze your inventory and get accurate information about the unsellable items. This will help you get to know the right amount of tax due.
W-2 and 1099 IRS Forms: W-2 forms are for full-time employees, and 1099 are mostly independent contractors who earn more than $600. The deadline for IRS is 31st January.
Annual review of financial and Tax return records: Review has to be made when paying taxes, the status of the start-up's financial records very accurately. There are many software tools for this purpose. Some of the more premier ones include:
The decision to begin your own start-up is exciting as well as daunting. The mere start of it can be immensely overwhelming, but if the start is right, then almost everything is well taken care of right at the very beginning. Thus, the chances of success of your endeavor increase by leaps and bounds. It is not by mere luck that some small businesses grow at a faster rate than others. The reason is that at the backend, they have put a lot of effort into organizing all the procedures, which may have been arduous for them but very helpful in the long run.
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