5 Accounting Tasks To Perform As Soon As You Start Your Business
Launching a business is a challenging feat, alright. You need to file for a permit to adhere to business laws in your area, hire people to join your team, and so on.
However, as soon as you launch your business, there’s still more work that needs to be done. Among them is getting your finances in order. This is where efficient and proper business accounting rolls in. Business leaders agree that you need to have your company’s finances in order the soonest you open shop.
Are you a start-up owner who’s wondering what accounting tasks you need to perform? Luckily, this post will cover that. Keep on reading below to learn more.
Bookkeeping is one of the constituents of accounting for start-ups. It’s all about business financial records and comes in two different types: single and double entry.
Single-entry bookkeeping is ideal for small businesses like yours and involves recording sales and expenditures.
In contrast, double entry is more detailed and adopts debit and credit recording. You’ll record each transaction under the credit and debit entries.
Bookkeeping records help in business aspects like tax preparation and decision-making. They include but aren’t limited to receipts, bills, and financial journals.
The best way to handle bookkeeping is to do it after every transaction. It’ll prevent instances wherein you forget to record financial transactions. With this, you’ll be able to rely on accurate financial data to run your business.
2. Filing Tax Returns
Most, if not all, states require businesses to pay taxes. Governments rely on taxes to fund public projects.
Failure to file taxes results in fines and penalties that eat into business finances and profits.
The best practice with tax filing is knowing and understanding the amount you’re required to pay. It’s often a percentage of your revenue and depends on your business structure. As a sole proprietor in the United States, you’ll pay self-employment, employment, and federal and state income taxes. On the other hand, if you’re a partnership, the business doesn’t pay taxes. Instead, each partner will pay individual taxes based on the profit share they receive from the business.
You should find out such details to ensure you’re filing the right amount of taxes based on your business category.
Invoicing is all about billing customers after offering them services and goods. It assists in ensuring customers don’t forget to make their payments. Even as they act as reminders, you receive timely payments as a business.
The ideal way of invoicing is listing the goods and services a client has received. Follow this with including the prices for each. The breakdown assists customers in understanding the final bill.
It’d help to send invoices to your clients immediately after finishing a project or the soonest you’ve released to them a product. Also, it’s important to include the payment details in the invoice. It makes the payment process easy for customers. They won’t need to call you to request details on making payments – enabling faster invoice processing.
4. Bank Account Reconciliation
Bank account reconciliation aims to ensure your financial records are correct. By definition, bank reconciliation compares the company’s balance sheet and the bank statement.
Besides ensuring records are accurate, bank reconciliation allows you to pinpoint manipulations and detect fraud in your company.
Begin by working on your bank statement. Compare your issued checks and deposits with the checks reflected on the statement. The amounts of these two should be equal. If it’s not the case, it shows that some are uncleared.
Next, check the cash balance on the bank statement. Add deposits and the uncleared deposits to the figure pinpointed as the cash balance. Deduct any outstanding checks you might have from the bank’s cash balance.
With the bank statement in check, look at your company’s balance sheet. Take the cash balance and add any interests you’ve gotten. Follow this with deducting penalties and bank service fees. The final figure is what you’ll use to compare with the bank statement’s.
Correct financial records will show match between the company’s cash balance and that of the bank.
Be sure to do bank reconciliation at least once a month. You want to track any mishaps the soonest.
5. Debt And Credit Management
Debt and credit are major components of running a business.
There are times you’ll lack the financial means to buy business resources. Instead of foregoing the purchase of these important resources, you can acquire them on credit and add them to your loans. In the same way, a client can seek your services on credit.
It’s always advisable to keep debt and credit to the bare minimum. If you have a large debt, you’ll end up allocating most of your business’ earnings to repay it. On the other hand, granting credit to too many clients reduces your cash flow efficiency.
Hence, credit and debt management are crucial. Take note of all the money you owe people and lenders, along with which of your clients owe you. Focus on eliminating debt as quickly as possible before it accumulates and becomes too challenging to handle. Also, follow up on clients that owe you money and request payments.
Accounting is an important aspect that contributes to your business’ success. The discussion above details the multiple accounting tasks you need to do the soonest you launch your company, as well as on a regular basis. Keep them in mind and practice them diligently to ensure a healthy and robust overall company financial health in the long run.