Congratulations on starting your startup! Not all great ideas see the light of day, but your dream has turned into a reality. You have the product, the human resources and the marketing skills to ensure that your company takes the market by storm. There is, however, one major aspect that you need to address – accounting! If your accounts are not in order and are not maintained in accordance with the latest tax laws, your fledgling business might have to wind up. You need to be up-to-date with the status of your capital, details of expenditure, and any changes to improve the financial performance of the business.
These 7 accounting tips will ensure that the performance of your startup is not affected due to any problems with accounting. The tips are:
All financial transactions in your startup should be recorded by opening a bank account. You need to create a separate checking account for your bank to keep proper accounting records, provisions for funds, and payment of taxes. Withdrawals and deposits related to your startup should be made through this account. Needless to say, you need to compare the fees for different banks and the facilities provided before you select the bank.
Like an established business, a startup too, needs to set achievable financial goals. These goals, however, need to be SMART (Specific, Measurable, Achievable, Realistic, and Timely). You need to break the bigger financial goals such as cash flow, profitability, and profit margins into smaller goals. You need to analyze your financial goals on a regular basis to assess whether you are on track towards achieving the long-term goals.
While focusing on business profitability and growth are important, it is also important to keep expenses in check. All expenses should be recorded in the ledger under the appropriate header. You need to ensure that you either appoint an in-house bookkeeper and software to record each expense or appoint an accounting firm to take care of this function. Not keeping records of expenses would lead to violation of tax norms, disruption in cash flow, and eventually loss of investor interest. Don’t forget to record even a single expense!
You always need to look at opportunity cost. Is it more profitable to perform an activity in-house or engage a professional firm? If you find that outsourcing the function ensures you are able to focus on the business and also leads to higher profits, you should choose this option. Professional accounting outsourcing firms will ensure that the financial health of your startup is reviewed on a regular basis and remedial action taken. You will be provided with valuable MIS insights, which will help you take informed decisions. With more time and resources devoted to the growth of the company, there will be higher returns.
Like an established outfit, a startup can realize great savings if it invests in the automation of certain tasks that are repetitive in nature and don’t add value to the bottom-line. You can avail the services of IFTTT online, which will lead to higher efficiency. The accounting function can be automated with the help of an integrated accounting software, which is cloud-based.
You will pay a very heavy price if you don’t understand the tax implications of a startup. If you don’t maintain your books of accounts in accordance with the latest tax regulations, penalties could be severe and in extreme cases winding up of your startup. All the processes should be tax compliant, including deductions. Every business decision from expenditure to capital allocation should be as per tax laws. A professional accounting firm will take care of all such regulatory compliance.
Even after you have successfully launched a startup, you need to be careful that you don’t make any costly errors, like not maintaining proper accounting records, etc. Engage a professional accounting firm, focus on the company, and watch it grow!
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