Accounting is a crucial function in any business. It is through accounting that a business will be able to manage its finances and tell whether it is making profits or losses and where the losses and profits are and how they can be managed; increased or decreased accordingly. To plan new strategies for the business a company will also need to look at the history of accounts. This will allow that business owners and business managers have reasonable expectations for the future and determine what improvements can be made at a time and what changes should be applied. Below is an insight in this regard.
1. Hire an accountant
It is important that a business invest in professionals during its early stages. If it cannot hire a professional it can always get someone who, although has not studied for the part has experience. Just like hiring a chef to prepare the meatloaf recipe, a fresh graduate may not produce as good meatloaves as a person who has worked in a bakery or kitchen for 10 years. However while looking for a professional accountant, business owners must make sure that the hired individual works as a freelancer or is employed part time at first because paying on a fulltime basis may be expensive while the business is younger.
2. Keep the accounts receivable different from accounts borrowed
At the start of a business, most of the money is usually from loans and investments. It is important that business owners learn not to mix what needs to be paid back and what is theirs. This will ensure that the business does not lose the trust of their customers and other potential investors if they are suddenly confiscated by the bank due to late payments.
It will also ensure that a business knows exactly how much profit they are making and how much loss they are incurring and from where. When the business is mature it will be able to make payments to all those it owes creating a healthy business environment for all.
3. Open a business account
Once a business is registered and licensed by the government, it is advisable that business owners create a separate bank account for it. A company is considered its own legal entity and will therefore be taxed. Keeping the business income separately will ensure your taxes are easily payable and are paid on time. This also makes life easy as it will ensure that none of the business owners or investors use the company’s money when they wish. It is important to note that before opening an account, business owners should shop around through the banks to find out the one with the reasonable and affordable fees as some banks have a higher fees for business accounts than for personal accounts.
4. Keep track of your business expenses
This means that there will be accounts from the head chef of what the deductible expenses are, and how much money they cost. If the chef buys meat worth $100 each week, this should be noted down to help the business owners and investors keep track of the growth of the business. There should be record of financial statements, deductible expenses, tax returns and a supportive document of what is reported in the tax return. His should be a business tradition that is set up right from the beginning. It will allow the employees and all those employed while the business is growing be able to keep track of all receipts and other important record. Though old school, this method is useful in ensuring the business is not losing money in the form of small-undocumented expenditures that were not expenditures at all.
5. Set up a payroll system
As a business owner, you need to prevent silly workday complaints that will cost your business such as a go- slow or a downright strike for that matter. Therefore, when employing people make sure to know whether they are permanent employees or individual contractors. If they are permanent employees, you need to ensure that you have a permanent and clear pay date and that you are withholding the correct taxes as required by the government. Ensure that you are also keeping track of how much you are paying the individual contractors. With the above, you will be on your way to success.