5 Accounting Basics You Need to Know to Run a Successful Startup Business - Business Media Group

5 Accounting Basics You Need to Know to Run a Successful Startup Business

There are a lot of responsibilities startup business owners need to handle in their initial years, and accounting is not an exciting topic. It brings in complex spreadsheets, crunching numbers, scavenging for receipts, recording expenses, filing taxes, etc.

However, startup owners prefer to do their accounting tasks to avoid the extra expense of hiring professionals. Also, if you are good at numbers, you can manage your books for the first few years until your business starts expanding.

In this article, Experlu sharing five accounting basics that owners need to know for running a successful startup business.

5 Accounting Basics For Startup Business Owners

Have A Separate Bank Account

It is necessary to have a separate bank account for your business, and you cannot mix it with your personal expenses. For example, you cannot deposit your business income to your personal bank account or use your personal credit card to buy business supplies.

Additionally, keeping these accounts separate will help you deal with tax and legal issues if they arise in the future. Even if you apply for a business loan, the bank will transfer the loan amount to a business account.

Keep Accurate Accounting Records.

You must record all your business transactions correctly from the first day of your startup. There are three primary financial statements in business, the balance sheet, income statement, and cash flow statement. Keeping the information of every transaction further helps you during tax return filing or when a company faces a legal threat.

A company’s balance sheet summarizes its net worth at a single point in time. Accountants use a general equation as: Assets = Liabilities + Equity

The income statement of the profit and loss statement of the company describes the financial performance for the year. It depicts the company’s net income and whether you created a value or destroyed it.

The cash flow statement records the gas transactions of the company. It depicts how much cash came in and went out on various business activities.

Budget And Forecasting

When you keep track of all your expenses and incomes from the income statement and check your cash flows from the cash-flow statement, it becomes easier to draft a budget for the company.

Budgeting is crucial as it helps you reduce unnecessary expenses, increases cash flow, maximizes profit, and helps in business growth and expansion.

As your business starts expanding, you need to forecast how your business will look in the future. This forecasting helps owners create successful business strategies, get you investments, and help you grow.

Know Your Tax Obligations

While starting a business, you must be aware of paying taxes on time. According to the tax laws, the amount of tax you pay depends on the nature of your business, industry type, industry location, and what you sell. There are different types of business taxes in the UK like corporate tax, income tax, NICs, VAT, and other international taxes (for overseas business).

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It is good to stay updated about a country’s tax rules at the state and federal levels. If your earnings are above the tax-free allowance of £1,000, you must register the company with HMRC or Companies House.

Hire An Accountant

Managing business operations and maintaining finances are two separate zones, and business owners may not be a master of all trades. To reveal the bigger picture of your startup, hire an accountant. They will help you with strategic tax planning, record keeping, financial analysis and forecasting, tax return filing, helping companies make financial decisions, and preparing financial reports.

If you don’t want to hire an in-house accountant, you can outsource the task to accounting firms. They provide part-time facilities to complete your immediate needs and are affordable.

Final Thought!

Owners may find accounting intimidating; therefore, the evolution of technology brought several accounting software applications for startup businesses. They help you manage accounts, bookkeeping, maintain transaction statements, payroll, etc.

If you have a little knowledge of bookkeeping and accounting basics, you can hire startup accountants. However, it may seem expensive during the initial years of business using accounting software. They will charge you less but provide equal services.

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