Have you recently started a business and need some tips for handling payroll? Here are 4 small business accounting tips every startup owner should know about.
Did you know 40 percent of entrepreneurs say bookkeeping is one of the hardest parts of running a small business?
If you’re not a bookkeeper or accountant by profession, it’s likely you relate with the woes of these small business owners.
Yet, accounting is an incredibly important function in any business. Get it wrong, and your business will spiral into cash flow problems. Bearing in mind poor cash flow management is the reason a whopping 82 percent small businesses fail, you want to get your accounting right.
Need a hand?
In this article, we’re sharing
Small business accounting tips of startup owner should know.
Let’s crunch those numbers!
Keep Business and Personal Finances Separate
You should never mix personal and business finances.
Most entrepreneurs know this, but do it anyway – and it’s easy to see why. Perhaps you started as a part-time entrepreneur, running a business as you work a regular job. So, naturally, personal and business finances come out of your pocket.
Regardless of your specific circumstances, mixing these finances doesn’t do your business any favors. You’ll miss the opportunity to establish business credit and come tax time; you’ll have a difficult time taking advantage of deductions.
Luckily, this is a simple problem to solve. Just open a business bank account (under your business’ name), and start keeping accurate records of your personal and business expenses.
Use Accounting Software
In the early days of your startup, you might not see any need to invest in accounting software. Expenses are still minimal, and you don’t have much money to work with. You can get away with handling everything manually.
As the startup grows, however, expenses increase. Maybe investors have started pumping in money.
This is when you need to start using accounting software. This will automate most accounting tasks and improve accuracy.
In addition to accounting software, you might need to automate other processes, such as payroll. Check out The PayStubs for an awesome payroll management solution.
Consider Hiring an Accounting Pro
Accounting and other financial management software will do the job just fine, but they can only do so much. After all, they don’t make accounting decisions on your behalf.
At some point, especially during rapid growth, you will need to consider hiring an accountant. This professional will not only keep track of income and expenses but also develop accounting policies that’ll steer the startup forward.
If you don’t have the budget for an in-house accountant, you can outsource the function to an accounting firm.
Create Financial Projections
Where do you see your startup in the five years?
To answer this question, you need to know how much money you’ll be pulling in (or losing) within that period. This is why every savvy startup owner must create future financial projections.
With these forecasts, you’ll be able to make sound business and financial decisions. For example, if your projections show declining incomes, you could consider changing your business model.
Put These Small Business Accounting Tips to Use
As a startup owner, the odds are stacked against you. Your small business is more likely to fail than succeed.
One of the critical things you need to keep both hands on is money. Lucky for you, we’ve fleshed out some of the top small business accounting tips you can use to ensure your startup has a solid financial foundation.
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