Accounting is not an easy subject to pick up in a short span of time. Its nuances and rules confound even those who have been involved with the subject for a long period of time. However, founders of start-ups do not have the luxury of hiring large accounting teams. Sometimes they might not be able to hire any accountants at all and might have to do all the finance work themselves. Hence, it is essential that they learn something about the subject, so that their finances may be in order. Following are few of the point on basics of accounting for start-ups
The first task is to join an accounting class or ask an accountant to teach you the basics. As a start-up, it is unlikely that you are going to have multiple modes of investments or several business lines. You are only going to be focusing on one particular venture, and you might only be dealing with a limited number of vendors. In this case, maintaining the books should not be too hard. Once you learn the ropes, all it requires is a little discipline to keep your numbers in order.
The second thing to do is to invest in good accounting software. There are many options available in the market these days and the buyer only has to pick and choose which one suits him best. There are software applications that have been built only for small businesses and start-ups. Choosing one among them would be ideal. The application should not be too convoluted and should offer the buyer only what he or she needs. The smaller your business, the simpler your software should be. Choose software that helps you prepare your financial and regulatory statements and also enables you to complete activities like reconciliation and financial closing easily.
If you are running a one-man show, then make sure that you separate your personal accounting records from the business records. This is especially crucial during the time of filing of tax returns. Avoid entering your personal data in the business accounting systems. Make it a point to keep the paperwork separate as well, especially at home, so that one does not get mixed with the other.
Learn how to make a budget and make it a point to prepare one without fail. Unless you know the quantum of funds you have and how you plan to spend it, matters can become chaotic very quickly. Soon your finances will be out of control and you will not know how to save money and how you spent the capital that you started with. Prepare a budget for every financial year, and if need be, for every quarter and every month. Then you will have a fixed path and a specific direction to take your company on and its important basic step of accounting
Do not default on your tax payments. Ensure you have a tax preparation process that gets completed on time and well within the date of payment. The penalties for not paying professional taxes are quite severe and financial regulators can come down quite hard on your company for defaulting.
Keep a constant watch on your financial statements. Even if you have an accountant doing all the finance work for you, as a business owner, you should know how your venture is functioning. You should know where your revenues are coming from, what your costs are, the assets you have, and what liabilities you owe. Only then can you run the business smoothly.
Keep all your documents in order. The legal agreements, bank statements, credit card statements, payroll information, tax documents, and equity agreements should all be kept in a place that is not only safe, but can also be easily accessed when the regulators ask for this information. Digitization of such information is the ideal method of storage.
Make sure you hire a good accountant. If you cannot hire one full-time, then bring someone on board as a freelancer or outsource. Finance and Accounting (F&A) outsourcing services company will provide you with the right support for your business, allowing you to focus on pursuing growth objectives.
So, these were the basics accounting tips for start-ups. Accounting work is vital for a company. Start-ups are no different. With regulators keeping an increasingly vigilant eye on the functioning of commercial enterprises, it is vital that all your finances are in order.