Suppose you are learning the ropes of your new business and have just begun operating your startup, kudos! You’ve taken the first step towards financial freedom. But don’t be complacent as you have only won half the battle. In business, you have many things to consider, perform, and manage. One of the most important things to keep your eyes peeled for, as a new business owner, is your finances.
Apart from marketing, operations, and retail work that needs to be done, it would be best if you also were on top of all your accounting tasks. In business, it is vital to monitor financial health through the process of accounting. This will help guide your business decisions and aid in the creation of future company plans. After all, every startup’s goal is to eventually grow and expand. You don’t want your startup venture to die even before it takes off.
If you are starting out, having trouble keeping your accounts in order, or simply need some tips on how to improve your efficiency in working on these accounts, here is accounting 101 for you. Doing this will certainly help you manage your business more efficiently, assuring you save more of your profits and waste less on expenses.
1. Open up a business bank account
Now that your company is registered, you’ll need a place to store your funds and business income. It is always best to have a separate bank account for your business, even if it’s a sole proprietorship. This ensures you do not confuse your personal income and expenses with that of your company.
First, open a business checking account as you will need this to pay off your suppliers (most suppliers deal with checks, as they are easier to trace, as well as swifter to deposit and handle compared to wads of cash). Afterwards, you can open a savings account for withholding taxes. It is also important to build your credit score by getting a business credit card. A high credit score means a greater likelihood of receiving financial assistance and funding in the future in case you need it for expansion.
2. Track your expenses to a tee
At the fundamental level of accounting and bookkeeping is the efficient and correct recording of business transactions, particularly your expenses. Not only will you be able to produce more accurate financial reports, but you will also be able to track and monitor your business growth. It also enables you to see just where every centavo of your hard-earned is going.
With these figures at your disposal, you can nip whatever wastes your money in the bud. Remember, having the right information allows you to make informed decisions. As a startup, staying on top of this is essential, especially in the early stages where you still have a few clients and your revolving fund is minimal.
3. Have a bookkeeping system
To effectively monitor and track your finances, you need to at least have a good bookkeeping system. Bookkeeping is the process of recording transactions on both debit and credit. You may choose to do this manually, or you may purchase bookkeeping software.
In addition, you may also outsource bookkeeping and accounting services. This decision allows you to focus your attention on more important matters like helping clients, developing products, or spending time with family.
4. Set up a system for taxes
Regardless if you just opened your business and have yet to file tax, it is important to already have a system in place for tax calculation and filling. Make sure that all the withholding taxes of your employees are correctly calculated. Also, include your sales tax. Don’t forget to factor in your deductibles so you can maximize your legal tax savings.
5. Calculate gross margin and profit ratios
Gross margin and profit ratios indicate whether your business is producing a return. At the most basic level, businesses operate to generate profits. Calculating these key financial performance indicators will help you assess whether your business’s performance is up to par. Your gross margin will allow you to see how much profit you have generated relative to the cost of goods sold.
Final Wrap Up
The word “accounting” may seem very daunting, and the process itself may seem challenging at first, but with these tips in mind, careful practice, and the right accounting tools, it will all be a breeze. Of course, if you still doubt your ability after taking all these tips as mentioned above into consideration, do not delay seeking professional help. Our team of certified public accountants will be delighted to offer you our services. Give us a call as we offer free 30-minute consultations.