Small Business Accounting 101: 9 Steps to Get Your New Business on Track
Running your own business is a journey, and you’re about to take the first step. But before your business gets off the ground, you need to ensure your accounting administration is set up properly.
Accounting is essential to keep your business on track, especially in the early stages. You need to know how to effectively track and manage your money, outsource or automate certain tasks, and seek advice from professionals.
This guide, brought to you by Bench, an online bookkeeping service, will walk you through essential steps to set up your financials and put your new business on the path to success.
1. Open a business bank account
Once your business is registered, consider where your income will be going. Separate your personal and business finances in different accounts to simplify taxes and monitor your business’s progress. Choose a bank that meets your needs and integrates well with your financial management tools.
2. Track your expenses
Keep records of all expenses to claim deductions. Capture and store receipts, statements, bills, checks, invoices, proof of payments, and other relevant documents. Expense-tracking apps like Expensify make this process easier and more organized.
3. Establish a bookkeeping system
Every business owner, whether doing it themselves or outsourcing, should do bookkeeping monthly. Options include using Excel or accounting software, outsourcing to professionals like Bench, or hiring an in-house bookkeeper based on your business’s structure, size, and needs.
4. Team up with a CPA
A qualified Chartered Professional Accountant (CPA) is essential. They can assist with lease negotiations, cash management, and ongoing reporting. Find a CPA who specializes in your niche and offers a free consultation.
5. Determine how you’ll get paid
Choose a payment setup that suits your business, whether it’s accepting online payments, using a Point of Sale (POS) system for in-person transactions, or a combination of both. Research options like Square, Stripe, or Shopify based on your specific needs.
6. Set up a payroll system
As your business grows, consider hiring contractors or employees and simplify payroll tasks with services like Gusto. Categorize team members correctly as employees or independent contractors to avoid penalties.
7. Determine your tax obligations
Understand your tax obligations based on your business structure. Sole proprietors usually claim income on personal tax returns, while corporations file taxes independently. Ensure compliance with sales tax requirements if applicable.
8. Keep on top of your gross margin
Increase your company’s income by improving gross margins. Calculate your gross margins by considering the Cost of Goods Sold (COGS) and expressing it as a percentage of revenue. This helps monitor your business’s profitability.
9. Keep refining your methods
Continuously review and modify your accounting methods to support growth and profitability. Creating an efficient system will contribute to the long-term success of your business.
Starting and running your own business can be overwhelming, but with an effective accounting setup, you’ll have more time to focus on the journey.
Hello!
I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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