Accounting for Small Business – 9 Steps to Keep Your Startup on Track
To conceive a startup business is one of the easiest tasks but can be a difficult one if you don’t know what you are doing. Surprisingly, most startups fail within the first year of launch. For you to be above the rest, you need to create a plan for success. You must know your product and everything about it and to do so, you need to create an impressive marketing strategy and organizational structure that includes how you will account for your business.
The following steps should give you an overview of what you need to do.
Have a Business Account
All your financial proceeds should be taken to the bank. To comply with some business law regulations such as taxation and levies, you must keep your business money separate from yours. A sole proprietor may have the liberty to have a shared account for both personal and business transactions but you are strongly advised against it. A bank that serves your needs and an open credit line will be an added advantage.
Record Your Transactions
You can either do it yourself, but if you are not good in bookkeeping, you can sign up an accounting services in Singapore so to let professionals clear the path for you. The structure of your business determines how your books of accounting will be processed. As your business grows, the chances are that you will need a professional to carry out the accounting activities for you. This will give you more time to engage in your core business.
Monitor your Expenditure
Good and clear records of your transactions will make it easier for you to make an analysis based on the records and take an appropriate action. Your checks, bills, receipts, invoices, and tax return forms should be in order at any given time. You can use these documents to claim tax returns or investors interested in your business can be attracted to you if you have clean traceable records.
Are You Required to Pay Tax?
The type of startup you have in mind will determine the tax category you are supposed to pay. If you are a sole proprietor or running a partnership business, income tax is claimed on your personal returns. Entities such as corporations are supposed to pay tax separately from the owners of the business. You will only pay goods and services tax (GST) if you are running a GST registered business.
Know Your Gross Margin
Your business will grow only if you keep the margins at a level that will get you enough returns and at the same time give your customers the best price. Note that the sustainability of your venture relies on the price of product and the cost at which the product is produced.
Gross margin should be calculated as:
Gross Margin % = Gross Profit / Revenue
Cross Profit is the outcome by deducting Cost of Goods Sold from Revenue.
Human Resource Management System
In the future as your business expands, you will see the need of a system in place to manage your workforce. Employees are a form of capital in your investment. A system that works for you frees up a lot of time and helps you to focus on the main business agenda.
Create an understanding with your workforce so that they know if they are employed or independent contractors. This will later ease your work when filing tax returns even when you have obtained taxation services from any tax agent.
How Will You Get Paid
From the different payment methods that are available, pick the ones that are truly convenient for both the clients and the business especially for accounting. You can use the following methods as appropriate
POS (Point of Sale): Appropriate if you don’t intend to have a merchant account which will act as a link between the system and your business. Transactions are accepted through a cash register or credit reader.
Online Payments: Everything is paid for via online platforms integrated in your business website.
Both POS and Teller: Works well if you want to receive payments via the merchant account or in person.
Seek the Services of a Professional Accountant
Your business needs professional friends to grow (Also see Your Startup’s Top 2 Most Trusted Accounting Allies). A trusted accountant will help you in brokering business deals, getting the best rates on your loans, and still be able to give the much needed cash flow statements. As you handle the business main goals, let this professional help you create a framework for your business.
Re-Invent Yourself
As you keep growing anticipate change. Create new avenues of adding value to your product or service by adding necessary modifications to achieve this. You can only maintain profitability if maintain an efficient system.
Keep in mind that accounting is related to almost every aspect of your business. Therefore, you need to ensure that your business starts on the right foot when it comes to accounting for it to succeed.