Small Business Accounting: Starting Up
Just established your business? Set up your accounting system yet? The earlier you get this done properly, the better it will be. A robust accounting system is absolutely essential for any business – big or small. It helps you keep track of your expenses, manage your finances and so much more. Bottom line, it’s all about earning revenues and tracking your expenses, and a properly setup and well maintained accounting system is crucial for success. Here are some steps to help you get started.
Open a separate bank account
Once your business is registered, earning income and paying expenses, you need a place where you can record and manage these. Open a separate bank account for the purpose so that distinct records are maintained. Don’t forget that this will make your life so much easier when it’s tax time, for GST accounting and for tracking and setting aside monies for staff related expenses.
You can initially start with a basic account, and then later on, move to an interest earning savings account. Needless to say, do some shopping around here and compare offers from various banks. Go with the one that is more affordable whilst meeting your needs.
Keep a track of your expenses
From day one you need to keep good records of your expenses and spend wisely in the areas which will set the foundation for the future. You may be generating income but if you are spending money fasting than you are earning, you will come into trouble in the future with cash flow.
Establish a proper system to organise your receipts and maintain your records making sure that you are safely storing expense records for your tax deductions and for for later referral. These days you can scan and store documents within your accounting software.
Set up a bookkeeping system
Bookkeeping is the process of recording daily transactions, categorising them and then reconciling the records with bank statements. Choose appropriate accounting software, and decide if you want to recruit someone for the job or outsource the task.
Generally, it is best to hand over all your bookkeeping to a third party so that you can focus on your core business. It is a false economy to try to do it yourself!
Establish a payroll system
You hire one person at the start, then two, and eventually a team. And some of them may be part time employees as well. Consider whether your staff should be independent contractors or employees. The amount of work to be carried out and the type will help you decide here - remember if you only need one or two people part-time, it will be less compliance to have them as contractors who can invoice you as each project is completed. That said, check with your tax account that you are meeting the compliance requirements for a contractor or an employee and organise someone to process payroll if this is the road you take.
Decide how you want to be paid
Are your sales rolling in? Great! Decide acceptable payment options. If you’d be willing to accept credit and debit cards, you’ll have to set up a merchant account or sign up with a payment processor. Also, consider automated debtor collection if you raise invoices and accept payment by EFT.
Determine tax obligations
Tax obligations widely vary depending upon your type of business structure. Income tax, GST, FBT, PAYG may apply - talk to an accountant or a tax expert, and they’ll guide you through what is required for each type.
Re-evaluate your methods
Re-evaluate your accounting procedures and systems every now and then. If you are using the right methods and appropriate solutions, you are saving time and increasing efficiency. Also ask for some advice from an accountant bookkeeper or business owners in your industry to determine how you are going and what you could improve.
