Five Simple Steps to Manage Your Business Finances
When you launch your business, one of your first priorities must be managing your finances. As a start-up owner, you will probably not have enough resources at your disposal. That explains why you should employ sound accounting strategies right from the beginning.
Here are five steps that start-ups should follow to maintain good financial health.
1) THINK BEFORE ORGANIZING
Many businesses simply start as limited companies (LTD’s). However, this is not always the best form of organization. Your decision to operate your business as a sole trader, has different tax implications. Also, the liability protection offered by various formations is different. If you incorporate, it will not be possible to become another formation later. That is why you should have a thorough understanding of the different business structures.
2) KNOW WHAT YOUR TAX RESPONSIBILITIES ARE
Your tax liabilities depend upon the state where you plan to operate and the kind of business you launch. If you employ people, you will probably also have to pay employee compensation contributions. If you do not pay your taxes because of your ignorance of these responsibilities, you will be subjected to expensive penalties and interest.
3) KEEP TRACK OF YOUR EXPENSES
The reason that most businesses fail is their inability to control cash flow. When you fail to keep track of your expenses, you will miss out on invaluable deductions that will save you lots of money on tax bills.
4) TAKE ADVANTAGE OF TECHNOLOGICAL ADVANCES
Accounting programs like Xeo or Sage are quite helpful for organizing your finances. Also, when you use software programs like these, you will not have to do much financial organizing when it is time to submit your tax return. You will also be able to save money on accounting fee if you can give digital documents to your tax preparer. Apps like ProOnGo and XpenseTracker help you organize your receipts, track spending, and log mileage. When technology is readily available, you cannot afford to ignore it.
5) ENSURE THAT YOUR BOOKKEEPING PRACTICES ARE FLAWLESS
Perhaps the biggest mistake that most startups make is ignoring their finances at the beginning. The processes involved in launching a business can be overwhelming for most entrepreneurs. Some business owners assume that their businesses are too small and hence they do not need to follow formal bookkeeping practices. Whether you run a small startup or an established business organization, good bookkeeping practices will save you from racking up penalties, late fees, interest, and other unnecessary expenses.