As an entrepreneur, your startup will require solid accounting practices from the beginning. This will allow the founders, financial managers, and business leaders to have real-time visibility to accurate information on accrued expenses vs, accounts payable. Accurate financial data is crucial because of how unpredictable startups are. This post will look at the reasons why accounting is crucial for startups.
Benefits of Accounting for Startups
An accounting process will allow a business owner to see how good or bad the business is performing financially. The business will have a better understanding of its past activities, and where it is currently. This makes it easier to make business plans for the future. Accounting for startups allows you as the owner to easily track accrued expenses for services rendered, and goods produced.
Below are five accounting basics every startup should be tracking.
- Bank statements
- Payroll
- Credit card statement
- Invoices
- Proof of payment
Bank Statements
With the use of online banking, dealing with bulky bank statements for businesses is no longer common. However, reconciling your startup’s bank account can not be ignored. Reconciling these statements every month will allow you to balance the general ledger balance to the balance in your bank account. Performing these actions will allow you to easily trace and find errors in banking that may otherwise go unnoticed without reconciling the statements each month.
Payroll
Tracking payroll includes retaining employee records of time to managing employee personnel records. As a business owner, it means you have to manage all related payroll forms which include 941S, W-2s, and 1099s.
Credit Card Statements
It is as crucial to reconcile your credit card statement as it is to reconcile your bank statement. With the rise of credit card fraud, multiple small charges may be going through your credit card without detection. Ensure that you have a backup for all charges on your card’s statement. This is especially critical if different employees can use the company’s credit card.
Invoices
Your customers need to be invoiced for products and services that your business offers. You should be able to create an invoice at the beginning of your business. The accounting software you may be using or planning to purchase will probably have an invoicing feature and accounts receivable tracking included. Ensure that you are invoicing and following up on the invoices regularly to get paid.
Proof of Payment
A supplier calls to inform you that they will not be shipping products to you until you’ve cleared your bill. You’re frustrated because you mailed a check to them two weeks ago. Always ensure that you keep bank statements close to determine if it has cleared. If it has cleared, you need to request a copy to give to your suppliers. If you are not using checks in your business, keep proof of payment safely along with the bill in case the payment is missing.
Endnote
Managing your business accounts from the start allows you to better control the finances, and properly plan for the future. You will know when your startup is overspending and when you need to reduce certain expenditures. Above are points that show you the importance of accounting for any startup business. Start tracking these features and watch your startup thrive.
Author: Lorelyn
Statements of the author and the interviewee do not necessarily represent the editors and the publisher opinion again.
