Accounting plays a significant role in startups because it allows entrepreneurs to easily track their expenditures and income, as well as access quantitative financial information useful in making business-related decisions. Effective accounting practices can help any startup stand out from the competition and attain long-term success in the business arena.
But, with the number of responsibilities entrepreneurs have as they start their businesses, most of them find it challenging to handle their accounting. This is one of the reasons why they’ll disregard the need to manage their accounting practices or simply implement accounting practices just for the sake of doing it.
If you’re planning to start a business soon, the following small business accounting tips can surely help:
- Learn The Basics Of Accounting
It’ll be very challenging for you to manage your business’s accounting if you don’t have any idea what accounting is. How can you track your accounts receivables if you don’t know how these are computed and recorded? Do you think you can balance your books if you’re unaware of the terms, abbreviations, and concepts used in accounting?
As a business owner, it’s vital that you learn the basics of accounting first. Investing in accounting software or outsourcing an accounting firm will not provide the best results if you don’t know the basics of accounting.
Depending on your preferences, you can work with a professional or look for other options to learn accounting. QuickBooks is a great example of the latter option.
- Invest In Good Accounting Software
Gone are the days when you have to track and balance all of your books from scratch. Today, you can easily download or purchase accounting software that will do all the hard work for you. Accounting software is a smart investment for startup business owners because such a platform minimizes repetitive tasks, allowing you to manage more important responsibilities. Accounting software also reduces errors because most processes are automated.
Accounting software is common today, so expect to find countless options when you start looking for one. When choosing, make sure to check the needs of your business, your accounting skills, available add-on features, and the cost. Accounting software is a cost-effective investment, but only if you end up with a platform that suits your business’s needs.
- Keep Accurate Records
One of the biggest mistakes startup business owners make is making the accounting process complex because they think that the complexity of their accounting practices equates to efficiency. They think that the more complex their accounting is, the better it’ll be for the business. However, this isn’t always true because implementing complex accounting practices will make it tough for businesses to find information, and even make the information more obscure.
Keeping accurate records is one of the easiest yet most effective ways to do accounting. Since you’re still new in the industry, you don’t have to maintain an overly complex general ledger. You just have to keep track of your daily accounting details, such as your banking and credit card transactions. It’s also important to keep all these pieces of information in one location so you can easily review them when needed.
- Open A Business Bank Account
Regardless of how limited your finances are when you start your business, you should never attempt to keep them in your personal bank account. Sure, doing so might be convenient as you won’t have to submit several documents for another account, but this can result in stress in the future. It’ll be challenging for you to determine whether your business is making profits if both of your personal and business finances are kept in the same place.
For you to easily track your business’s progress, open a business bank account as soon as your operations start. Having two separate bank accounts will make it very easy for you to track your business finances. Additionally, having a separate bank account for your business will make your life easier during the tax filing season.
- Keep All Of Your Receipts
Even in today’s digital age, wherein more and more people are engaging in electronic purchases, it’s still vital for business owners like you to keep receipts. When making purchases online, take screenshots of your receipts, and make sure that the date and final costs are clearly printed.
Regardless of how small the purchase is, you should never throw away any of your receipts. Instead, you should keep all of them in one location and organize them accordingly.
Keeping all of your receipts will allow you to determine where your business is spending most of its finances, allowing you to come up with sound decisions for your business’s budget.
Know Your Priorities
Regardless of how busy you are as you’re starting your business, you should never neglect its accounting. On the contrary, you should always prioritize the accounting practices of your business as these will make it very easy for you to succeed in the long run.