By : Troy Martin
Good accounting methods are essential to the success of any startup business. Unfortunately, in the excitement of starting a business, entrepreneurs sometimes make bad financial decisions that end up haunting them down the road. It is highly important that you pay attention to certain accounting details when starting your company, thus, laying down the track for your business to have a smooth-running financial future.
In this article, you will learn the top five things start-up companies need to know about accounting.
1. You got to keep good records
You might find bookkeeping boring and tedious, but you really can’t neglect it. You need to keep careful track of your expenses and your revenues. You have to record your receipts and reconcile your bank statements. To start with, you must establish a bookkeeping system, determining whether you will use a cash or accrual method of accounting.
When you keep good records, you will be all ready to go when you need to hand over tax data to your accountant at the end of the year. You can then rest assured that you will be covered if you ever get audited later on.
2. Accounting software is your friend
Accounting software helps you record your sales, receipts, claims and expenses, so that you don’t have to do all your bookkeeping manually. This software also makes it easier to share your financial information with your accountant, for review and compliance come tax time.
There are numerous accounting software solutions on the market, from QuickBooks, to newer cloud-based systems like FreshBooks. There are even some good mobile accounting solutions that you can access on your smartphone. At the very least, you will want to keep track of your numbers in an Excel spreadsheet.
Payroll is important even if you only have a few employees. For one, you will need to determine whether your workers should be deemed employees or independent contractors. For employees, you will have to figure out a payroll schedule and how much taxes to withhold. Once you have a good payroll system in place, you will be all set for when your business takes off and starts hiring more people.
Make sure you don’t make any of these common payroll mistakes so you don’t have to pay the price down the road.
4. You need to know your tax obligations and procedures
Startups have a lot of tax obligations to figure out, including whether they will file as a sole proprietorship, LLC, partnership, or corporation. You will also need to establish procedures for collecting sales tax (if this is applicable to your business), and figure out your payroll taxes. Payroll taxes are especially important, as small businesses may be subject to increased payroll audits.
5. You’re going to need some professional help
Certified professional accountants provide essential financial services to help new companies start off on good financial footing. These services include everything from tax preparation, to payroll services, to helping you set up an employee retirement plan. Some accountants also provide business consulting services and will train your office in accounting software solutions.
For further reading, this article provides a brief but useful summary of when and how small businesses can benefit from hiring an accountant. If you have a startup in the SLC area, you can also fill out this short form for more information about our business tax preparation, payroll services, outsourced CFO solutions, and more.
Troy Martin is a shareholder of the firm in the Logan office of Cook Martin Poulson, P.C. Troy works as a facilitator for family owned businesses through succession and strategic planning processes.
Social Media links: Facebook, Twitter, Linkedin, Pinterest and Google +