By admin, July 20, 2020
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Successful startups require their founders to work long hours and multitask. Entrepreneurs tend to focus more on boosting sales through advertising and marketing. However, your company’s financial health is extremely important so you can identify opportunities for growth. This makes it necessary for startups to build a solid accounting foundation, recognize risks and take organizational decisions efficiently.
Whether you’re thinking of using accounting software or hiring an accountant, here are some accounting tips for your startup to ensure your business stays on track.
Many startup founders provide the funds to set up their company and invest a substantial amount of both time and money on research. Bookkeeping and accounting thus become vital to keep track of expenditures.
Many entrepreneurs find it scary or challenging to manage stacks of bills and documents. What they fail to realize is that accounting and bookkeeping offer a clear picture of their business’s success.
Here are some ways in which a startup can benefit from hiring accounting and bookkeeping services.
Proper accounting and bookkeeping services are vital for your startup’s success.
Here are a few guidelines to help you stay on top of your company’s financials.
1. Know the law
As a startup owner, it’s incumbent upon you to be aware of the laws that apply to your business. You need to be able to answer to various questions such as:
⮚ How long should you save invoices?
⮚ When should you file your taxes?
⮚ What information do you need to record your expenses and revenue?
By knowing these answers beforehand, you are better prepared for tax season and won’t be caught off guard.
2. Forecast major expenditures
Your startup will most likely face many ups and downs in its initial years. You need to think about the market’s seasonal effects and be prepared to make sure that your business doesn’t go under during slow periods.
Along with this, it will also need substantial capital to execute your business strategies and upgrade software, among other factors. It is therefore logical for entrepreneurs to think about big expenses, ensuring no golden opportunity goes missed due to shortages in investment.
3. Track expenses properly
Industry events, office supplies, team lunches and similar expenses have a way of adding up to become big line items on your overall company financials. That’s why you should track your spending from day one. This will prevent any surprises and allow you to identify areas where you need to cut back to effectively manage your income and expenditures.
Also, when it comes time to file your taxes, you’ll be glad you kept a record of everything. It’s easier to recognize deductions when you can find expenses with their receipts.
4. Separate business and personal expenditures
Similar to how you should keep your private and professional life separate, startup owners should separate their business and personal expenses.
For this, it helps to have a dedicated bank account for savings and chequing. This helps save time when it comes to tallying up deductible business expenses. Also, get used to handling different accounts for personal and business-related spending. If you are investing capital in your business out of your assets, you should properly document the contribution.
Additionally, having a dedicated business bank account will limit legal exposure to business debts, especially if you own a corporation or limited liability company (LLC). In generic terms, you can’t deduct personal expenses on a business tax return. The only time it is deductible is if you have a property you use for personal use and business, such as a home office or car.
5. Hire a professional accountant or bookkeeper
Hiring a professional accountant or bookkeeper to keep track of your company’s cash flow can make a huge difference. This way you ensure your records are up to date and in the correct order. They’re also better informed about potential tax loopholes, fees and deductions that might apply to you.
But the work of accountants and bookkeepers may overlap. Bookkeepers are mainly concerned with classifying and recording income and expenditures, where accountants can also help with strategic planning and tax filing. Determine whether you need a bookkeeper or an accountant. You might also consider outsourcing your bookkeeping to a reputable firm. If you want to learn about the benefits of outsourcing, click here.
6. Focus on acquiring more clients
You can’t run a business without clients, so the sooner you figure out how to acquire them, the greater the chances are of your company making it long term. By identifying channels that can help you get more clients, you can optimize your business by lowering costs. Remember, it’s not possible for you to know about every acquisition channel right away, so you need to focus on the most lucrative opportunities. Once you’ve analyzed them, you can explore a more varying range of channels.
7. Establish financial goals
Rather than just generically thinking that you’re going to build a multimillion-dollar company, you need to set financial goals that are measurable and reachable. Daily, weekly and monthly revenue goals ensure you stay on track while making adjustments necessary for your business’s growth. Set milestones to reach along the way to make it easier to achieve your long-term goals and stay on track. Reaching smaller goals will give you the confidence to keep on your entrepreneurial journey.
It’s important to focus on ensuring your products and services grow, but you also need to build a strong foundation. Setting up a business can be overwhelming, but by following the points outlined here, you’ll have your finances in order right from the start. Remember, the more time you invest in your company’s accounting, the more time you will save to ensure your business is on the right path.
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