Make no mistake: setting up a business is a complicated process. This can often be overlooked by entrepreneurs who are swept up in the excitement of leaving their current profession and following their dreams.
There are so many jigsaw pieces that need fitting together before a full picture is formed. Funding, marketing, supplier linkups, employees, customer satisfaction – and these points are only scratching the surface.
One other aspect is accounting. For those who struggled with math at school, it’s particularly daunting when tackling the financial affairs of a business. Even one mistake with the numbers could have a detrimental effect on your company, including tax issues with the IRS.
To prevent this from happening with your new business, read this quick guide on how to do effective accounting.
Determine how you’re paid
As the business world continually shifts to digital, the use of physical cash is becoming increasingly uncommon. Consequently, you will need to have a payment setup for your company.
If you did opt for the QuickBooks as mentioned above, you might choose its payment system. However, if you want greater scope in terms of what payments to accept, you should sync the platform with a specialist platform such as Paynomix. You can then accept alternative QuickBooks payments without needing to have two separate systems.
There are lots of expenses that small businesses can claim as tax-deductible. This even includes various start-up costs. Of course, before you can claim any deductions from the IRS, you will need to track these expenses.
As for what expenditures you need to keep a record of, these include:
- Bank statements
- Credit card statements
- Canceled checks
- Previous tax returns
- Proof of payments
By holding onto these documents, you can keep track of your expenses. Although with specialist software, this can be done automatically. Speaking of which:
Use accounting software
For any business – new or established – accounting software should be a necessity. It gives you the ability to track and manage all of your finances in one place, in real-time.
Taking QuickBooks as an example, this software allows you to pay staff, send out invoices, manage taxes, automate payments for expenses, and more. It only saves you many hours, but it also eliminates the possibility of human error causing issues.
Set up a business bank account
Before even getting the business on the go, you need to consider how income will be received. As a result, you should seriously consider setting up a bank account specifically for the company.
By keeping your business and personal finances in separate bank accounts, this makes it easier to keep track of numbers. When tax season comes around, for example, you will not have to fear about trying to untangle your business-related money from personal finances.
It is also advised to start up a separate savings account. This way, you can say, put a set percentage of your revenue in the savings account, ensuring there’s enough money ready to pay off your yearly tax bill.