Take Account: Your Guide to Accounting for Startups
Starting a company is never easy. It takes drive, motivation, dedication, sweat, tears, and just a little piece of your soul.
There are a lot of moving parts, tons of things to consider and lots to keep track of.
One of the more difficult and complicated cogs needed to start a small business is the accounting. Accounting is its own language, math, universe, and so on. But, it doesn't have to be feared or loathed.
Continue reading for your guide to accounting for startups!
Once your business is registered and all required licenses and permits are obtained, you'll want to open a separate bank account for your business. This will be invaluable come tax season.
When opening a bank account for your business, it pays to shop around at various banks to see what each one offers in terms of benefits. Also, bank fees for business accounts tend to be higher than personal accounts. Keep this in mind and choose the bank that offers the best benefits and prices for what you need.
If you registered your business as an LLC, C- or S-Corporation, you're required to separate your business finances from your personal finances. However, if you are a sole proprietorship it's not a requirement, but still highly recommended.
One method for setting up your business structure and finances is to pay yourself from the business account like a regular employee. This keeps taxes simple and easy when they come due.
Another idea is to open a separate savings account for your business and deposit a percentage of your profits into it. When taxes come, you can pay what you owe out of your business savings account.
Keep Track of Expenses and Revenue
You'll want to devise a way to keep track of all your business expenses and revenue. There are a variety of ways to do this. Some small businesses use Excel, creating their own spreadsheet to track everything.
If you're not that adept at Excel, there are a variety of bookkeeping programs and apps available to help, such as cloud computing software. You can also go old school.
Office supply stores carry printed accounting ledgers that are broken down into daily, weekly, or monthly timeframes. These are probably best for smaller businesses just starting out or sole proprietorships.
However, if you track business expenses, you'll want to be organized and thorough. You'll want to have a section for utilities, rent, and insurances, as well as a section for supplies and inventory. It may also help, depending upon your business, to have a specific section for marketing, vendors, and miscellaneous services expenses.
Like people, businesses have to pay taxes. In fact, depending on how you registered and set up your businesses, it could be considered its own separate entity.
What this really means is that, like you, your business is subject to income tax, but also other types of taxes like payroll, sales, and property. This is where separating your personal and business finances, as well as detailed bookkeeping, becomes crucial.
Certain industries will also have their own taxes unique unto them. For example, the transportation industry has an excise tax. There are also taxes for being a small business owner.
It's best to do your research on small business taxes and look into outsourcing by hiring a small businesses tax accountant firm. They'll know about the ins and outs of taxes for your company and how to help you so you don't inadvertently break any tax laws or end up paying too much.
Outsourcing Accounting for Startups
Accounting for startups can be tricky and at times confusing. If you're feeling overwhelmed with the accounting, it could be a good idea to outsource your accounting needs.
There are many benefits to hiring a business accounting firm. But, there are also many dangers and pitfalls to avoid. Be sure to do thorough research and choose the right accounting firm for you.
Outsourcing your accounting needs will not only help you come tax season, but will also help to avoid audits, prepare for audits if they do come, and to keep detailed and complete records of all your business transactions.
This doesn't only help with tax season but also when seeking out new investors and generating reports for current investors. When owning a business, it helps to be as transparent as possible, not only to the federal government but to current and potential investors.
Investors want to know what is happening to their money and how well their investment is going to pay off. Hiring a small business accounting firm helps to ensure your finances are in perfect order, making you ready for almost anything,
Account for Your Accounting
Accounting for startups can be overwhelming. But it doesn't need to be. There are outsourcing options available to help you make heads or tails of your business finances.
But, before outsourcing, be sure to set up a separate account for your business. While this is required for some businesses but not all, separating personal and company finances benefit all small business owners. It will make things easier not only for tax season but also for growth and expansion in the future.
The more you know about accounting for startups, the more you'll understand what your accountant is talking about. You may even reach a level of knowledge where outsourcing may not be needed for the first couple of years.
If you still find yourself with questions about accounting for startups or need to know more about outsourcing your accounting needs, contact us today for a free consultation!