You’ve got your new business venture all figured out. You know what you’re going to sell or what service you’re going to provide. You know how much you’re going to charge and how you’re going to sell your items. You even have an exciting name picked out and a logo in the works. While you’re on your way to opening your doors, you don’t want to forget about one big piece of the small business puzzle…your accounting responsibilities. Small business accounting can get tricky, especially if you’re not well-versed in it. That’s why it’s best to start out right and employ the help of a professional, so that you’ll avoid some common mistakes that plague first-time business owners. Here’s our ultimate guide to starting your new business’ accounting.
Your Bookkeeping System
Once you’ve legally established your business, it’s important to open a business account at your bank, so that you can stay organized right away. This will help you differentiate between business and personal earnings and expenses, so that the lines aren’t blurred between the two. Once you’ve opened up your business accounts, it’s time to get your bookkeeping affairs in order. Your bookkeeping system will be the backbone of your business, helping you to record transactions, categorize these transactions and reconcile bank statements. You’ll also need to decide if your business will operate using the Cash Method of accounting or the Accrual Method. The Cash Method recognizes your earnings and expenses at the time that they are paid or received. The Accrual Method recognizes them when the transaction occurs.
You have a number of options when it comes to who is going to manage your bookkeeping and it’s important to choose wisely. You can choose to handle this by yourself, utilizing a program like QuickBooks to keep you organized. You can also opt to hire an in-house bookkeeper or outsource this task to a professional bookkeeper outside of your business. It’s generally recommended to entrust this responsibility to someone who is knowledgeable about small business accounting to ensure that you’re going about this the right way. Remember, one wrong move can cause trouble for your business.
Your Payroll System
If you have employees, which many small businesses do, you’ll need to think about payroll. You’ll first need to establish which types of employees are a part of your business. Are they traditional employees or independent contractors? This will be important in the way that you pay them and at tax time. Having a payroll system in place that helps you stay organized is crucial, so that you’re keeping track of all hours worked and all monies paid.
Preparing for Taxes
A big part of operating a small business is staying organized, especially when it comes to tax season. Tracking expenses will be extremely helpful for your business, as this will help you lower your tax burden. However, not all expenses are created equally, so it’s important to be mindful of just what exactly you’re trying to write off. Items that have stipulations and may require a bit more proof for the IRS include:
Meals and entertainment
Vehicle and home office expenses
Out of town travel
This is where it’s helpful to have a professional on your side, who can help you get off on the right foot when it comes to your small business’ accounting practices.
The accounting experts at Bodine Perry are ready to help your small business thrive! Call (855) 851-8318 or visit www.bodineperry.com to learn more.