Accounting Steps to Take When Starting a New Business

Accounting is one of the most important aspects of starting and operating a business regardless of its size. It is very easy to get caught up in choosing an enterprise name, designing a logo, and preparing business cards and flyers, but if you don't have a grip on the numbers, your business will not last long. Businesses require accounting services to ensure that all monies are accounted for, to separate personal and business expenditures, and monitor the growth of the enterprise. Here are some accounting steps that you should take to benefit your growing business.

Utilize accounting software

Don't wait for your business to grow so that you can shift from manual accounting to software. Utilizing the accounting software right from the inception of the business is beneficial in various ways. First, the software offers a quick and easy solution to handling payments and receipts as opposed to using spreadsheets and handwritten ledgers. You can easily obtain daily, weekly, and monthly reports of your business' progress without undergoing tedious calculations. Accounting software can also facilitate automated billing to clients and allow you to create quotes and estimates using premade templates.

Accounting software can help you with your taxes through features such as automatic tax calculations, tax reporting, and multiple tax rates. You can upgrade the software and add features to accommodate the growing needs of the business. Choose the ideal accounting method There are accounting methods available for business: cash accounting and accrual accounting.

Cash accounting

Cash accounting is usually suitable for small and medium-sized businesses due to its simplicity. In this method, incomes and expenses are recorded when received and paid respectively. So, for instance, if the business receives a check on the 25th of the month, but the checked is deposited to the bank or cashed on the 1st of the following month, the income will be recognized as at the date it was received which is the 25th. During taxation, only expenses that have been incurred during the accounting year are deducted.

Accrual accounting

Accrual accounting is usually utilized by large business with a high sales volume. Small and medium businesses can also use this method of accounting, but it is optional. In this case, revenues and expenses are recorded as they occur, regardless of whether the cash has changed hands. For instance, if the business incurs an expense on the 14th of the month but the payment is made on the 24th of the same month, the expense should be recorded as at the day it was incurred, that is, the 14th, even though the payment has not yet been made. Handling business accounting and financials requires the use of a professional accountant. An accountant will not only prepare your books and financial statements, but they can also recommend accounting software for your business and ensure that the systems remain up to date for proper monitoring of the business growth and financial position.