Like many startup business owners, you could be more passionate about sales than accounting, yet success depends on your ability to manage money. If you don’t establish a scalable and robust accounting system from the start, your business will experience poor planning, financial errors, and a high chance of failure.
In this blog, we’ll go over the fundamentals of accounting for startups and offer valuable advice on maintaining accurate and well-organized financial records.
What financial records do I need to keep?
It is essential for a business to maintain accurate financial records in order to comply with tax laws and regulations. Some of the key financial records that a business should keep include:
- All funds the company receives, including loans, grants, and other sources of capital, and other revenue sources like sales and invoices.
- Information on any debts owed to the company.
- Each money spent
- Any assets owned by the company
- Inventory and stock
- Goods purchased and sold, and the buyers or sellers of those purchases, excluding retail enterprises.
- Bank statements and any other necessary documentation
Helpful tips for to do accounting for a startup
Plan your business
When establishing a startup, one of the most crucial things you can do is to prepare a business plan. This document will outline your company’s objectives, strategies, and methods. Making informed decisions about your firm and staying on track might be challenging without a business plan.
Register your business
When establishing a company in the UK, you should choose the type of business structure. The three most popular categories are partnerships, limited companies, and self-employed. Selecting the appropriate type for your company is critical because each has unique benefits and drawbacks.
Choose an accounting method
Cash basis accounting is a straightforward method that tracks cash outflows and inflows during a particular period. In an accrual accounting system, revenue is recorded when goods or services are given, and expenses are recorded when incurred.
When it comes to accounting for startups, selecting an accounting approach that is easy and simple to understand is crucial.
Get organized
Getting organized with your accounting paperwork is essential when starting a new business. A system for monitoring bills, income, and spending must be established to do this. One approach to do this is to use cloud storage to store all your papers in one place. This makes it easy to access and communicate information with your bookkeeper or accountant.
Another option is to scan your bills and receipts immediately and input them into your accounting software, automatically tracking your expenses and income. It is an excellent approach to staying on top of your accounting papers and ensuring no payments or expenses are overlooked.
Keep financial records up to date
For any small business, maintaining correct financial records is essential. It assists you in keeping track of your costs and earnings and offers an overall snapshot of your company’s finances, which can be helpful when looking for funding or making critical business decisions.
You can take a few steps to ensure that your accounting books are updated. First, establish consistent accounting practices and stick to them; these could be daily, weekly, or monthly bookkeeping tasks. It will make it easier to ensure that all transactions are recorded consistently. Secondly, ensure you have trustworthy spreadsheets or accounting software and utilize it to monitor all financial activity.
Don’t be afraid to ask for help
Starting a new company can be challenging, particularly when it comes to accounting. Many new businesses are reluctant to take the guidance of a bookkeeper or accountant, even though this is the best thing for keeping your records in order.
Working with a bookkeeper or accountant will help you make sure your records are up-to-date and accurate. It will keep you organized and ensure you fulfill all business requirements.
Final thoughts
Taking the time to understand accounting basics is the first defense against your startup failing because of a cash flow problem. You don’t have to be a certified public accountant with advanced knowledge of accounting and taxes. Focus on knowing only the crucial accounting ideas and how they apply to your business.
