When you are starting your own business, it is easy to neglect your finances. You can get wrapped up in so many other things that taking the time to manage your new business’s finances is the last thing on your mind.
Having accurate information about your finances that is available at a moments notice is crucial for the growth of small or start-up businesses. Without a clear layout of what your finances look like, you will end up making poor decisions that can bankrupt your business.
If you have no background in finance or accounting, this may sound like a burden. We want to help make this as easy as possible to ensure that your startup makes it to the big leagues.
1. Gather What You Have
Accounting is different for every business, but the first step should be fairly similar. It is important, and ultimately crucial, that your business gather documents such as:
- Bank Statements
- Tax Papers
- Legal & Governmental Documents
All of these documents have information about your business that, if in the wrong hands, could completely destroy it. Gather these documents and sit down with a tax advisor to decide which of these needs to be kept permanently and which can be disposed of.
2. File Your Documents
This is something that business owners either love or hate to do. No matter your preference, it is necessary for an organized and successful business.
Instill a filing system in place that has a separate file for each kind of business financial document. You should also consider having a file designed specifically for documents that need immediate attention, so that you don’t have to sort through file after file to find urgent matters. Your system can be stored either in its physical form or on your computer, as long as it’s kept up properly.
3. Determine Who Will Be Responsible
Depending on your comfort level, time commitments, and other time consuming activities, you will need to choose whether or not you will take on this task, or if you will need assistance.
There are many small business financiers that would be able to take on your finances. This can also be beneficial to your business, as this person will have no emotional or personal attachment to your business. With that, they will be able to give you unbiased tools and information about where your business stands financially.
4. Choose an Accounting Method You Feel Most Comfortable With
Depending on the size of your business, you will need to find a type of accounting that works best with your method of payments, staff, and which you are most comfortable with.
We typically see small businesses that use a cash method of accounting. This involves collecting the income as cash, credit card charges, or check when it is received and the expenses when they are actually paid.
Larger businesses typically use the accrual method. This form of accounting involves counting income when a sale is made, regardless if payment is received and the expenses are counted when you actually receive a good or service.
5. Open A Business Bank Account
Your business financing plan revolves in your business’s bank account. Be sure that you open a business bank account with online capabilities. This will allow you to see your business finances anywhere and at any time.
It is crucial to open a business bank account. This will help you build credit towards your business name to accommodate for obtaining a business loan in the future. Take on a credit card to your name so that you can build more credit to your name – but be careful with spending.
Controlling and managing your business finances is crucial for any business in any industry. We hope that these five tips will help you establish and manage your own accounting business attached to your business.