Accounting tips for New startup
Maintaining your own financial records can seem daunting when you're new to it. However, it's an essential part of running your business. Here are 8 helpful accounting tips for the startup. 1. Open a Bank Account After you’ve legally registered your business, you’ll need somewhere to stash your business income. Having a separate bank account keeps records distinct and will make life easier come tax time. Note that LLCs, partnerships, and corporations are legally required to have a separate bank account for business. Sole proprietors don’t legally need a separate account, but it’s definitely recommended. Start by opening up a business checking account, and then any savings accounts that will help you organize funds and plan for taxes. For instance, set up a savings account and squirrel away a percentage of each payment as your self-employed tax withholding. Next you’ll want to consider a business credit card to start building business credit. Corporations and LLCs are required to use a separate credit card to avoid commingling personal and business assets. Before you talk to a bank about opening an account, do your homework. Shop around for business accounts and compare fee structures. Most business checking accounts have fees that are higher than personal banking, so pay close attention to what you’ll owe. 2. Start keeping financial records from the off As soon as you set up your business, start recording your all costs and sales you make. In fact, you may incur costs before you start up. These can still be deducted from your profits, which will reduce your tax liability. Start recording everything from day one, keep up to date and make sure you know the dates your accounts, GST, tax etc are due. Late payments and returns can incur heavy fines and penalties. 3. Use High-Quality Accounting Software. Since many small startups lack in-house accountants, accounting software like MYOB picks up the slack and improves the business’s overall efficiency. Many different accounting software programs exist, from bare-bones spreadsheet programs to full-service accounting machines. For example, many programs offer the ability to create custom invoices, track online and in-person payments, generate automated reports. Some accounting software providers bill by the month for easier budgeting, while others charge annual licensing fees or require long-term contracts. If you intend to use an accountant, agree the system with them before you start your business. You will be surprised how much this can save on fees if you use one with which your accountant is familiar or recommends. You may even find that some of them offer a free, ready-made spread sheet. 4. Avoid Over-Hiring. Many businesses require employees to function. You might need sales representatives, customer service associates, technicians, and other staff members from the start. However, a skeleton crew offers several benefits. When you run your startup with the minimum number of employees, you reduce operating costs and increase net revenue. This gives you more flexibility in your accounting. Delegate multiple responsibilities to each employee and create broad job descriptions. Never overload an employee beyond his or her capabilities, but don’t hire staff members to sit at their desks and stare at one another either. 5. Create a Sustainable Budget. A sustainable budget requires realistic estimations of revenue and expenses. Some expenses, such as payroll and leasing fees, remain static from one month to the next. Others, like merchandise, change over time. Many startups also incur one-time expenses. If you need equipment, supplies, and other items that will last several months or years, factor those into your initial budget. As expenses and revenue change, update the budget and evaluate new ways to maximize profits. An underestimated budget might seem healthy at first, but it creates problems down the road. Conduct market research to determine a realistic figure for each category, then update it as circumstances evolve. 6. Schedule your accounting time. Bookkeeping involves recording transactions, placing transactions in proper accounts and reconciling bank statements. Whether you handle your own financial records, hire a bookkeeper or outsource to an accounting firm, you must pay attention to the financial side of your business. One way to handle your accounting time is to schedule a set time every week to handle your accounting tasks. 7. Send out timely invoices and follow-up on past-due invoices. Make sure you send out invoices on-time. Invoices you do not send or send late can damage your cash flow. You can provide terms to encourage quick payments. Talk to your account about the best terms you should offer your clients. 8. Research Tax Law. In order to encourage new business setup and benefit small businesses in general, Singapore- based small Medium enterprises (SMEs) are incentivized to grow and prosper using tax cuts, benefits, and breaks. Study the details of Tax Exemption and deduction Scheme introduced by IRAS (eg: Startup Tax Exemption Scheme (SUTE), Productivity and Innovation Credit (PIC)) from IRAS website. With these exclusions, your SME or start-up should be able to enjoy loads of savings throughout the tax season.