Accounting Tips for Start-ups

It is easy to put off accounting in the beginning stages of your business.

Accounting can be complicated, but startups can still benefit from simple accounting practices. These practices can help your business grow.

How to open your bank account

Every startup should evaluate its priorities to determine which accounting style it should use: cash, or accrual.

Small businesses are more likely to use the cash method of accounting because it is easier. Accounting is done in real-time as the money is received.

Accrual accounting is more complicated and includes line items for accounts receivable as well as accounts payable. This method is more important than the actual transfer of money from one account to another. Accrual accounting is more common in larger businesses. In some cases, it may be required by law.

Although an in-depth analysis may not be required immediately, it is a good idea to maintain basic records starting from day one.

What documents will you need?

The documents needed for opening a bank account are usually:

  • A Company registration certificate
  • Directors’ IDs
  • Proof of addresses of the directors.

Financial Records to Track

Startups can start by keeping track of the financial records below.

Payroll

In the beginning, payroll is not a problem for startups that have one employee (the founder). It is important to keep detailed payroll records for startups with fewer employees. It is compulsory to issue income certificates to your employees. Having a proper payroll software program makes this step very easy.

Statements from banks and credit cards

Startups might want to take the time and reconcile their credit card and bank statements. Examine statements, compare them with internal ledgers, and take note of discrepancies.

Manual reconciliations can work for small companies, but it is recommended to use proper accounting software in order to avoid double accounting transactions and always have accurate figures in a readable format.

Recipients of payments

It is important to establish a good habit of keeping a record of payments for goods and services.

Payments

Many new businesses don’t have the ability to absorb large bumps in their supply chains. It is important to keep track of all payments to vendors to make sure that any dispute regarding payments can be resolved quickly.

Tip: 

Try to negotiate good payment terms with your creditors in order to receive some discounts.

Returns on taxes

Legally, businesses must keep tax returns on file for outsourcing their accounting requirements. Outsourcing is often less expensive and more preferred by mature businesses that have reached the point where they require professional accounting services.

A lot of owners appreciate the security offered by an accountant. If cash is available, this could be a viable option. To determine when professional accounting might be most beneficial for your business, you should evaluate your startup on a regular basis.

Nett-Solutions-Accounting-for-start-ups

What specialist software do I need?

Technically, it is not needed.

You can also opt to do your bookkeeping and accounting manually. It is not always cost-effective. Startups worry that expensive accounting software could be too complicated and draining on resources, especially if they have a small staff.

It is tempting to cut costs by not using accounting software but instead using an Excel document or hand ledger. While this may save you some money, it can also compromise accounting accuracy. Accounting software is now affordable for most businesses and has been for the past 20 years.

Pricing for software varies depending on the provider and the price plan. However, there are many options to meet the needs of startups.

Subscriptions include accurate double-entry accounts. 

Accounting software can be expensive and complicated, but most startups don’t require such specialized software. A product that is affordable may be the best fit for small and new businesses.

Like this article?

Share on Facebook
Share on Twitter
Share on LinkedIn