When initiating a business, you might decide to put off many operational aspects until a later date. However, it is never too early to set up an unpretentious accounting function. Whether you are tracing your bootstrapped expenses or revenues, it is never a wise choice to go too far in the process without launching an accounting system. It does not have to be a complex system. However, excel sheets will not cut it. It is valuable to institute an accounting system that supports your business model and unique business needs while keeping a focus on your future goals and ambitions for your business.
Here are a few ways to manage your accounting needs in the best way possible.
Set up a simple accounting function
When you are just initiating your business, you do not yet require something fancy for your bookkeeping. There are many good options out on the market that is simple and convenient for a new business. Systems like QuickBooks and Xero are user-friendly and inexpensive, which is precisely what a company such as yours requires at this point. There are also some free options for you if you are short on cash; however, they will only offer extremely limited features.
A simple accounting function will take care of everything related to your payroll, invoicing, bookkeeping, and payments, which takes care of most of your basic needs. Be sure to check all features before implementing a system and ask for a demo so that you get a fair idea about its functionality.
Set a chart of accounts
It will suffice to say that the chart of accounts would form the core of whatever accounting system you use. It lists all the accounts included in a business’s general ledger. It helps you to locate specific accounts quickly and conveniently. It must be created to cater to the unique needs of your business and track income and expenses appropriately.
Open a business account
Irrespective of the fact that your business is bringing in any revenue, you must get a business account right at the start. Personal and business finances must be constantly kept separate as this will save you from many troubles later. Banks, these days, offer online portals that can be used to manage your finances as you please. You can authorize your bank to make sure automated payments that are of high priority so that you never miss them. Moreover, the newly established accounting function can integrate with your bank account, which can be highly efficient for all your business operations.
Hold on to your receipts and invoices
All invoices and receipts must be held and stored in a suitable place for future reference. Whether they are paper or electronic, develop a bookkeeping habit of safely storing all information and proof of your transactions. This will ensure that you have a headache-free tax season at the year-end because it will be easier for you to account for everything.
Stay on top of your tax obligations
This might be surprising, but you need to consider taxes in your accounting function before starting sales. Your business must develop a good standing in terms of both a provincial and federal tax standpoint, including all fees and registration requirements. Your taxable income is your net income, which is deducted after deducting all expenses. Therefore, keeping a record of all important documentation is important as it will make the whole process easier.
Stay on top of your payroll taxes and 1099s because that is the government’s money which you are assigned the task to hold. Therefore, you are required to account for it. Find a reputable tax expert and your accounting function that can help you stay acquiescence with your tax responsibilities and preemptive preparations to curtail the tax bite.
Create an effective payment collection process
Every business has an accounts collection system installed that manages accounts receivables. Your bookkeeping system must guide you with the open invoices and balances. All payment terms must be highlighted on invoices. When collecting payments from your customers, remind them of the due date 2-3 days before. Your clients should be clear about your payment terms because you cannot afford a negative cash flow early in your business. Start with a simple payment collection accounting function and gradually start accepting checks and other forms of online payments.
Forecast for the future
Projecting expected expenses will help you deal with the cash burn. Tracking how much runway you have in terms of cash allows you to anticipate better and plan. An accounting function that can help you develop better future projections is essential currently.
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