Brand building is essential for a business. It will help to create a strong customer base with brand awareness.
Profitability ratios relate income statement accounts and categories to show a company’s ability to generate profits from its operations.
Now that you are considering starting a new business on your own, including having a sole business idea, designing a career that has the flexibility to grow with you, working toward financial independence and investing in yourself.
Now the real challenge begins as you quit your regular day job & become a business owner yourself, not knowing how that industry works. The most important part of starting your business is managing finance. You can’t proceed too far without establishing a simple & efficient accounting system that won’t get too complicated for you. The early stages are the time one needs to establish the structure that will support your company financially and help you define your financial strategy as you too grow.
It is very important that you manage your accounting properly for the growth of your business. However, it is not necessary to spend a fortune doing it. Rather you can invest it in your own business.
These are the basic that you must follow before you start your new business,
- Open a Business Bank Account
Opening a bank account that is separate from your personal account is very much necessary for accepting payments & paying your creditors. If you will have employees, a separate payroll account should be set up as well. This should be the account where you make payments and receive payments as well.
- Separate Personal & Business expenses
Avoid using the business account for personal use by establishing corporate checking & saving accounts. Maintain a separate income statement and balance sheet. Use checks from your business banking account or separate business credit or debit cards to pay for all of your business transaction.
- Keep records of receipts & invoices
Keeping a record of all your transaction can help you in the long run of your business. This will also come in handy when you have to pay to taxes. You can either keep their physical copies or store them on the cloud so that you can have their access from anywhere.
- Make a list of Items
Create a list of items and materials the company owns. This list will become your assets in the accounting system. For example, cash, office equipment, buildings, vehicles, and office supplies. Include the value of the assets when you make your list.
- Create a process for Payment Collection
Always have a process for payment collection so that you know from where and when you will be getting your money. Even keep records for new customers. Establish credits guideline and create a collection timeline so your clients know what is expected. Keep a simple process for payment collection, even for accepting payments through PayPal, or any other online payment.
Choose the right method of recording the transactions
Now that you have set up your business account, the question is how you maintain it effortlessly without investing much of your time. Now you have to choose how you would like to record your transactions. You can record the transaction on your own, hire an accountant or use accounting software.
- Though recording your own transaction would be the cheapest solution for you but it will take a large chunk of time out of your daily work. Recording transaction and making calculation will take too much of your time. And you may make errors while bookkeeping.
- If you hire an accountant, you need not to worry about managing your books yourself. The accountant will take care of financial complexity. But, always keep in mind that hiring an accountant can get expensive for your business.
- The best alternative is using an Accounting Software. You can record your business transaction yourself without needing an accountant. The software will automate your accounting process giving you streamlined book and accurate calculations.
Setup your Charts of Accounts.
After choosing the method for recording transaction, it’s time to set up your chart of accounts. A chart of accounts is simply a list of accounts that you will be using in your business such as revenue, cash, accounts receivable, accounts payable, payroll, supplies, rent, utilities, etc.
Choose the right Accounting Software for your Business.
Now that you are clear which way you want to proceed with, choosing the right accounting software depending on the requirement of your business.
Make a list of crucial features that you absolutely need in your business’s accounting software. Here are some of the features which must be part of a good accounting package,
- Create and customize invoices
- Track expenses according to categories
- Manage inventory
- POS mode billing
- Income & expense management
- E-way bill
- Bank integration & reconciliation
- GST Reports
- Bank Reconciliation
- Multi-user login
- Manage a list of customers & vendors
- View account payables & receivables
- View Balance Sheet, Profit & Loss statement and Trial Balance reports
As you will face multiple setbacks in offline accounting software, so it is better to use online accounting software.
Understanding the Requirement for your Business.
- If the software is bloated with every possible feature you can imagine, it will become difficult to use for you & your team. So, go for software which has a simple user interface and is not overstuffed with unnecessary features. The clean interface makes it easy to focus on the important tasks and can reduce the learning curve.
- As you are starting a new business so your requirements are of small businesses, so choose a software that can help your small business grow. But, it is also better to select an accounting software which can scale with your business needs.
- The major concern of all business is the safety of their data. If your accounting software provider is hosting the application on their own servers, ask them about the security measures they are taking to safeguard your data.
- No matter how good or user friendly the software is, you will need support at some point. And if you have nobody to talk to when you are stuck, your entire investment will go in vain. So before buying always inquire what kind of support you will be provided when you are in doubt.
Budget & Prices
Most of the software provides free trial for a short period of time and then the service becomes paid. So the best suggestion is, do a little research & make a list of some accounting software which you consider is good. Signup with all of them and spend a little time experimenting with all of them. Find the software that you are most comfortable with.
Always have a clear discussion with the company about the actual cost of product & any future costs before upgrading from the free trial. This will be helpful for your business to avoid any hidden cost burden. Make a comparison of the pricing of different accounting software. Invest in the accounting software that you think will take your business to next level.
Always keep in mind, that it will be very difficult for you migrating to different software once you have started and invested so much of your time and money on accounting software. Finding the right software is not easy, take your time but try and make a quick decision. It’s always better to spend more time before the purchase to save frustration a later stage.
Looking for the best accounting software for your business, start here. Checkout our free trial.
A certificate of deposit is a savings certificate with fixed maturity dates & specified fixed interest rates. Continue reading “Certificate of Deposit”
A balance sheet is an important financial statement prepared by a company at a specific period in regular interval to showcase its financial position.
Accounts payable occurred when a company procured some goods or raw materials from a seller on credit. So, on credit means the company opts for late payment within a stated duration.
Financial statement analysis can be referred to as the analysis of financial reports like balance sheet etc. This analysis can be done quarterly or annually as per the business requirement. It helps to assess the past, current & future financial situations of the business.
Cash flow and revenue are very necessary for a small business as it shows the health status. Cash flow & revenue both are different so never take both of this as equal. Revenue shows how the business performs and sales
An investment center is responsible for the growth in revenue of a business or entity through various investments in capital assets. Continue reading “What is Investment Center?”
Ending inventory estimation is a difficult task to carry out. Ending inventory is the amount of ending units of inventory at the end of a month or fiscal year.
Income tax form 16 is issued by an employer to its employee as a proof of the amount deducted as income tax has been deposited. Income tax form issued on annual basis i.e. every year on or before May 31st.
A pledged asset is can be referred as the loan risk decrease asset. It helps lenders to decrease the debt risk so that he can provide service with minimal risks involved.
Cash Flow forecast is the process of cash income & expense projection. A business must project cash income & expense for smooth business functioning and to be always ready with cash in hand for any unexpected hurdles.
Cash flow statement represents a company’s cash handling capacity. This statement shows how a company manages its cash, where its generating revenues to fund operating expenses like salaries, rent expense, asset purchase expense etc.
Fair market value is the standard or fair market price of a property at the time of selling or auctioning in the open market.
Static Budget can be defined as the budget which never changes irrespective of the actual result. For example: If the operating expense goes above fixed amount then also this budget will not change.
Social Security tax is levied on citizens of United States by United States Govt. Under Federal Insurance Contributions Act.
Memo entry doesn’t have any effect on general ledger, journal or balance sheet as it’s not recorded in these accounts.
When expenses occurred without any cash flow then those expenses are termed as “Non-Cash Expenses”. For example, asset depreciation;
Valuation account is a balance sheet which combines with asset & liabilities account to find out the net carrying amount of respective assets and liabilities. Allowance for doubtful accounts, accumulated depreciation etc. termed as a valuation account.
prime costs are directly related to production costs. These costs are consumed during the production process. It includes the labor cost and raw material cost as raw material and labor are the prime inputs in manufacturing a product.
Spoilage defines leftovers in a manufacturing process. These are also called as product wastes. These can be of two types avoidable and unavoidable.