Building a company from the ground up isn’t a task for everyone. It takes the willingness to work long hours, and the ability to keep many plates spinning. When it comes to financials, many entrepreneurs focus on boosting sales, wooing investors, and funding marketing and advertising efforts. The work of establishing solid accounting practices is often put on the back burner. Later, this can create a real headache.
It’s best to consider accounting and financials from the start. Here are five accounting tips that entrepreneurs can apply from the beginning.
1. Track All of Your Spending From The Start
Team lunches, attending that industry event, replenishing office supplies, printer ink; all of these things may not seem like earth-shattering expenditures at first. Still, they add up quickly. In fact, incidental expenses, travel, and maintenance can add up to being a pretty big line item on your financials.
It’s a smart idea to track all spending from the start. It prevents surprises, and it can help you to identify where you might prioritize cutting back when things get tight.
When it comes time to file your taxes, you’ll be glad you kept good records. It’s much easier to identify deductions when you can find qualifying expenses and the accompanying receipts.
2. Prioritize Creating a Cash Reserve
This is a good time to be prepared for the worst in both your business and personal life. One of your top financial priorities should be building cash reserves for both. This is money that you can rely on in an emergency, and that you can use to prevent going into your other resources.
One of the first things you should consider is maintaining existing cash flows. This includes keeping your job until things are more established. In addition to this, it’s a good idea to earmark a certain percentage of your funds for an emergency savings account. Remember that cash issues are one of the top reasons that startups fail.
3. Know How You Are Going to Structure Your Business
When it comes to things like insurance, financial liability, ownership, and tax considerations, the structure of your business matters. You’ve got a few different options. Each has their own set of complexities and potential consequences.
The simplest and least expensive to set up is a sole proprietorship. This involves registering a business name, or simply doing business as yourself. The drawback is that you and your businesses are one and the same. Any lawsuits, tax actions, or other adverse actions can impact your personal finances.
A second option is to incorporate your business. This is a more complicated process, and involves shelling out a bit of money. However, it can be worth it as it creates your business as a separate entity and limits your liability (hence: LLC) if you are sued.
4. Select a Software Package For Your Financials
As a startup, you probably won’t have the funds to hire a professional to stay on top of your finances and accounting. At this early stage, you still need some sort of means to track your financials, keep records, and to comply with tax and reporting requirements. If not, things can become very messy, especially if you get audited.
You’ll need to find a tool that will help you with your finances. A good financial package will take care of a lot of things for you. This includes:
- Expense tracking
- Tax Reporting
- Bill Payment
- Monthly Quarterly And EOY Reporting
There are many popular packages available to you. Some are very low cost. Just remember that if you have investors and other principals from various countries, you may need to have your financial documents translated for them. Pick Writers has reviews of the largest translation companies. You can use this information to pick the service that meets your needs.
5. Stay on Top of Invoices
Let’s be honest. Cash flow issues can really kill a business. If you aren’t collecting what people owe you, you can’t grow your business. One of the key factors in staying on top of this is ensuring that your invoices are sent out on a timely basis, easy for your clients and others to read, and that you offer payment options that work for those clients.
Not only does a good invoicing system help you keep cash flowing into your business and allow you to pay bills, investors also want to see that you are receiving a steady stream of money in collecting your debts.
Of course, the slightly unpleasant side of invoicing is dealing with late payments and non-payments. That is something you will have to be prepared to deal with as you launch your company.
Parting thoughts: Accounting And Finance is a Key Part of Your Launch
Granted, accounting and finance may not be the most exciting parts of launching a business. Still, they are absolutely vital to your success. You can ensure that your company gets off to a good start, and that you avoid future headaches by applying some tips here.