Basic Accounting Tips For Those Just Starting Out

If you're just starting out in business, it's important to understand the basics of accounting. Here are a few tips to help you get started. First, always keep track of your expenses and income. This will help you stay on top of your finances and make sure that you're making a profit.

Secondly, be careful about who you borrow money from. Make sure to read the fine print on any loans before signing anything, and be sure to pay back what you owe on time. Finally, consult with an accountant or financial advisor if you have any questions or need help getting started. With these tips in mind, you're well on your way to mastering basic accounting principles!

If you're just starting out in business, it's important to understand some basic accounting concepts. Here are a few tips to help you get started. First, keep track of your income and expenses. This will help you stay on budget and make sure you're making a profit. Second, understand the difference between cash and accrual accounting.

Cash accounting is based on actual money that flows in and out of the business, while accrual accounting takes into account transactions that haven't actually happened yet. Finally, always document your transactions! This will help you stay organized and figure out where your business stands financially.

Accounting For Small Businesses: Growing Your Business

The accounting department of your company is the engine that propels all of the decisions that are made. Any decisions you make pertaining to inventory, payroll, risk, or reporting will have repercussions on your books.

Naturally, it is a business sector that is ripe for optimisation, and even smaller businesses are capable of increasing their back-office efficiency by making the appropriate adjustments to their accounting and bookkeeping procedures.

Create A Thorough Budget

Keeping meticulous records of all of your company's expenditures and the type of cash you have available is, of course, a need. On the other hand, you might be astonished to learn how many owners of small businesses choose to bootstrap this procedure without first documenting anything verbally.

Put your budget down on paper, and then begin going through the specifics, looking for ways to cut costs in areas such as record-keeping, payroll, or sales operations.

Make The Right Accounting Decision

When first getting started, new small firms have to decide whether to use cash accounting or accrual accounting. Cash accounting is more convenient, but it becomes challenging to maintain after a certain point in the development of a company. Make sure you have a solid understanding of the benefits offered by each alternative, as well as the most efficient way to move from one to the other.

Separate Personal And Business Expenses

The majority of accounting for small businesses includes drawing money from personal accounts to fund costs associated with the firm; nevertheless, you should be wary of making this a regular practise. In the interest of accurate tax reporting and to limit legal risk, it is a best practise to keep sensitive information and business expenses distinct from one another. In the event that this is not an option for you, you should at the very least make sure that all of your personal donations are meticulously documented so that you will have accurate records for your business tax return.

Pay Close Attention to Receivables

Your accounts receivable (AR) provide a wealth of information regarding the performance of your customers, their behaviours, and the long-term payment trends. The accounts receivable ageing report should be run on a regular basis, and you should pay attention to any differences in the way that your clients pay you.

Monitoring Invoices

When you have your AR ageing report in hand, you will be able to determine which customers are the most prompt with their payments and which customers consistently fall behind. Look at your customers who aren't doing as well as they should and call them to validate their invoices. You should not assume that you will be paid simply because you have sent out a bill; your financial data can tell you which consumers require more direct interaction on your part.

Understanding Accounting Software

Very few small enterprises still use manual bookkeeping methods. Streamlining data entry, reporting, and analysis is the name of the game these days, and accounting software is the name of the game. But the solution cannot be found in just any piece of software. You will need to have a thorough understanding of the platform, including how to connect it to your accounts, how to configure automated alerts for reporting, how to organise financial data, and a variety of other topics. This is one of the best single enhancements that you can make to the workflows that are used in accounting.

Set Up A Reconciliation Of Banks Schedule

The level of congruence between your bank statements and your financial records can be determined by performing bank reconciliations. This is a crucial component in gaining a knowledge of the cash flow of your firm as well as the amount of liquid money that is available to you at any given time. Although it is advised that you run this report on a monthly basis, individual businesses will need to establish their own reporting schedules.

Make Specific Financial Goals

When it comes to managing your company's finances, setting goals is just as important as managing any other area of your business. Determine measures that offer insight into performance, such as cash flow, the efficiency of labour, or minimal monthly profits, and then work with those indicators. Establishing these standards early on and maintaining extensive records of how well they are met will be quite beneficial.

Prepare For Tax Season Now

If your firm is still in its early stages, you are probably still getting acclimated to the process of compiling your company's accounts for each new tax season. Therefore, it only makes sense for you to proceed with caution in this area. Tax obligations and expectations for businesses are significantly different from those of people. Furthermore, the tax requirements for your firm will alter based on the type of your organisation (whether it be an LLC, sole proprietorship, general partnership, etc.).

Pay Attention to Changing Regulations

Is your company ready to deal with the constantly shifting regulations that the Financial Accounting and Standards Board (FASB) and the SEC have put in place? Throughout the years, accounting procedures have undergone several changes (revenue recognition saw a significant change just a year ago). You are going to need to keep up with the changes if you want your business to continue to be in compliance with the FASB's requirements for Generally Accepted Accounting Principles (GAAP). This is a continuing objective for the vast majority of small businesses, but it is essential to the success of your firm in the long term.

Take Into Account Your Customer Credit Policy

It is standard practise for companies to offer lines of credit to consumers they trust, particularly when personal ties are involved; nonetheless, you should exercise caution to avoid being overly liberal in this situation. Credit extended to customers can easily snowball into unmanageable debt. If you are providing your consumers with this level of leeway, you should review your credit screening procedure and ensure that you are placing your faith in the appropriate parties.

Think About Particular Outsourcing Projects

The aforementioned advice is able to assist owners of businesses in managing their books; but, why manage everything on your own? Bookkeeping services that are outsourced are becoming an increasingly realistic option for businesses of all sizes. Imagine that you have found inefficiencies in your bookkeeping that you are unable to correct (such as knowing how to analyse financial reports). If this is the case, you can delegate these responsibilities to professionals who will be able to guide you through the specifics.

Important Accounting Advice For New Businesses

The culture of startups is one of a kind because of how self-sufficient it is. You and your team are very proud of your abilities to solve problems, to collaborate on finding solutions, and to operate efficiently.

It's a wonderful quality to have, but unfortunately, it's not one that you can afford to carry over into other areas of your life, like accounting or finances.

Finance is the engine that drives any and all businesses. Your team needs to seek out the appropriate guidance in order to increase the likelihood that your startup will make it through the early, challenging stages of its development and mature into a fully-functioning and prosperous business.

The Foundation of Good Accounting Is Strong Systems

Accounting is more than just finding a reliable small company accountant in Melbourne to look after the numbers for you; it also involves setting up appropriate procedures to ensure that your startup's finances are correct and well taken care of.

When you have the appropriate system, you are able to:

• Find ways to cut down on errors and blunders
• Produce information that you and your investors are interested in automatically
• Automate tasks such as pay runs, reporting, and invoicing among other things

And all while utilising a single, straightforward platform!

Obviously, you can't have a system that's too complicated. When you're just starting out, you have to operate efficiently, which means you might not have the manpower to devote to a more thorough strategy.

Our small business accountants in Melbourne will set you up with a cloud-based accounting system that will alleviate the stress placed on your team while simultaneously providing you with all of the data you require to make informed decisions.

In addition to that, we are able to make recommendations and put in place additional systems to ensure that all areas of the financial management of your business are simple and uncomplicated. This includes optimising the systems and procedures that are already in place.

Your Business Accountant Is Not Just a Reporter; It's All About Strategy

You, as the operator of a startup, undoubtedly realise the significance of having a solid plan. Even though your ideas might be groundbreaking, you still need a strategy to deliver them to consumers and expand your business.

What you might not realise is that accounting is about much more than simply providing you with the numbers; rather, it's about ensuring that your financial planning for the future is accurate. Accounting, in contrast to bookkeeping, is focused on the long-term picture.

And it may at times include assisting you in the development of a strategy.

Our Melbourne accountants for small businesses are able to comprehend your objectives, and then, by employing statistical analysis, they offer suggestions to assist you in achieving those objectives. We are an important member of your planning team, which is something that many business owners of startups don't realise they have.

When you get together with your accountant(s) in the near future, make it a point to get their feedback; we have no doubt that they will be delighted to offer their perspectives.

Be Prepared To Expand

The life of a startup is uncertain. One minute, you're going about your business as usual, and the next, you've just secured a significant investor or seen your one-of-a-kind product or service become widely available.

Because you can never be sure what the next day will bring, it is absolutely necessary to ensure that the accounting system you use for your startup is adaptable enough to keep up with the company's growing success.

Cloud accounting software makes accounting simpler for businesses with a limited number of employees, which is one of the program's advantages.

That is not the end of it. Nevertheless, cloud accounting is also scalable, and it can expand together with your company owing to a variety of packages and features that you may switch between without any disruptions in service.

Excel is not capable of handling growth or complexity anywhere near as well as other accounting software like as Xero, MYOB Essentials, or QuickBooks. Take it from us.

Maintain a Wall of Separation Between Your Personal and Professional Finances

This is a mistake that is made by all different kinds of small businesses, whether they are startups or not!

It is tempting to just use the accounts you already have. After all, it is less complicated, requires less effort, and results in you receiving your earnings immediately.

Nevertheless, there are also significant dangers associated with it:

• It exposes you directly to business liabilities and debts
• Your personal savings will be depleted to pay for business taxes and costs
• It will make your bookkeeping more difficult
• You forego numerous corporate tax advantages.

Unfortunately, making the changeover can be difficult. Depending on how long this arrangement has been in place, it could take hours of labour to untangle your personal funds and business finances from one another.

You just do not have the time to deal with anything like that; fortunately, our small business accountants in Melbourne are able to handle this matter on your behalf.

Remember: You Must Attract Investment

Accounting is a tool that is used by other organisations to make choices. Accounting is one of the tools that new businesses employ to accomplish this goal and to entice potential investors.

You've got a fantastic concept for your new business. You will, however, require financial backing in order to transform that concept into a marketable product and a lucrative enterprise. When trying to convince investors to put their money on your side, having good accounting is essential.

And if you don't have a decent company accountant, you can't have proper accounting either!

A qualified accountant is aware of how important it is for startups to get funding and will produce reports that are geared towards this end in order to help your company.

In addition to this, we will provide you with guidance that you can use in order to make investing in your startup a more appealing option.

Be Certain Your Accountant Has Complete Access

Once you have located a small business accountant in Melbourne that understands your startup and everything it stands for, you are required to grant that individual unrestricted access to your financial records.

If they are going to assist you in accomplishing your objectives, it is imperative that they are aware of everything concerning the financial operations of your firm.

In order for this to take place, it is necessary for them to have access to everything.

We completely understand how nerve-wracking it is to hand up so much control over your child to someone else. However, putting your faith in us will help you avoid a great deal of hassle in the future.

Maintain Correct Business Records

Keeping accurate records is one of the most critical obligations that an owner of a small business must fulfil. Accounting software can digitally store financial records as well as automate a significant portion of the process of record keeping. When you make a claim for a tax deduction for an expense, this makes it much simpler to record the amount, time, location, and business purpose of the transaction in question.

The requirements differ from country to country in APAC; for example, you are required to keep financial records for 5 years in Singapore, but for 10 years in the Philippines. Keep in mind the record-keeping requirements of your nation and get advice from a professional accountant regarding the most effective procedures. Nevertheless, the following are some modest firms and new ventures that deserve special mention:

• Gross receipts are the funds that come into your personal account as a result of the operation of your company, and the records that pertain to this income consist of Cash register tapes, information pertaining to deposits (cash and credit sales), receipt books, and invoices.
• Expenses are the costs that you incur as a result of running your business, and records include things like cash register tape receipts, account statements, credit card receipts and statements, and invoices. Cancelled checks and other documents that reflect proof of payment or electronic funds transferred are also considered records.
• Receipt scanners By automatically mapping the contents of receipts and invoices to predefined areas inside the accounting software, you may streamline the process of digitising paper documents like invoices and receipts so that they can be easily tracked. The capability of an employee or business owner to scan receipts using the camera on their smartphone can be enabled by accounting software that either comes with its own mobile app or supports apps developed by third parties. These applications utilise optical character recognition, also known as OCR, which converts text into code that can be read by a computer.
• Fixed assets must be recorded in order to calculate the annual depreciation as well as the gain or loss that results from selling the asset. Invoices for purchases and sales, statements from the closing of real estate transactions, cancelled checks or other documents that identify the payee, amount, and proof of payment or electronic funds transfer, as well as credit card receipts, statements, and invoices, are examples of documents that are considered assets. Amortization is the process of writing off expenses incurred in connection with the purchase of an intangible asset with a finite lifespan. Other types of assets, such as current or indefinite-life intangible property, are not subject to depreciation or amortisation in the same way that tangible property is.

Select an Accounting Technique

Accrual accounting and cash accounting are the two main methods from which small businesses and startups can choose when to record income and costs. This decision must be made by every small business and startup. For purposes of taxation, this offers a way of accounting that is consistent. Accrual accounting, which records sales when a product ships or a service is supplied, is required by a significant number of publicly traded or big privately held businesses.

In the retail industry, a sale is recorded at the moment of purchase; but, in other businesses, it is possible for revenue to not be recognised until several weeks or even months after the transaction has taken place. It is necessary to use double-entry bookkeeping for this. Accrual accounting, which takes a more long-term perspective of the firm, typically offers a clearer picture of a company's overall financial health than other methods of accounting.

Accounting on a cash basis, in which income is recorded only when payment has been received, is often favoured by sole proprietorships and other forms of low-volume enterprises because it is perceived to be simpler and less time-consuming to administer. In a similar manner, costs are subtracted from the total amount of money that is withdrawn from the company's account.

Keep The Books Current

If the books are not kept up to date, neither the owners nor the employees of the firm will have an accurate view of the company's financial status. One technique to ensure that the books are always up to date is to automate the process of capturing receipts and invoices. Creating a link between your accounting software and your bank accounts is another essential step.

However, some accounting software has a plug-in that will take information from your bank account and automatically obtain daily bank transactions and statement files. Credit card and bank statements can be downloaded by businesses and then manually imported as CSV (Excel). It is possible for the company to establish the matching rules that will be used in their system to reconcile the statements, which makes the process of reconciling the statements very simpler. Some accounting software has a direct link to banks, allowing the owner of the company to handle and finish all banking duties within the accounting system rather than having to also log in to the portal for their online bank account.

Improve the AP Terms and Invoicing

Take advantage of the credit terms offered by your important suppliers so that you can keep your cash on hand for longer. You should pay your invoices according to a schedule that optimises the flow of cash through your business, and where it is feasible, you should pay early to vendors who provide a discount for doing so. Do all in your power to encourage prompt payment from consumers so that you can maintain a consistent flow of cash.

This may involve providing discounts for early payment, conducting credit checks on prospective clients prior to conducting business with them, and, if required, revoking credit arrangements. Accounting software that is able to automate the invoicing process by automatically sending out bills and follow-up reminders is another potential solution to the problem of unpaid invoices building up.

Keep An Eye On Some Expensive Costs

The cost of labour constitutes the highest expense for the majority of small firms, and inventory is frequently another significant expense. Many smaller companies decide to outsource their work to freelancers and consultants who charge on an hourly or project basis so that they can save money on labour expenses. This method can be more cost-effective if the work being done by the contractors requires fewer than 38 hours per week to do, and it can typically be adjusted to meet the requirements of the situation.

The executives of an organisation can benefit from using time-tracking software because it provides them with a better understanding of how much specific jobs are costing the company. This, in turn, enables the company to better budget for these costs and discover strategies to keep these expenses under control. Tracking inventory carrying costs, inventory turnover ratio, the amount of money lost due to outmoded inventory, and various other crucial metrics are examples of ways in which businesses can reduce their inventory costs. Because the regulations governing the hiring of independent contractors and consultancies differ from market to market, you should be sure to verify with your legal advisor before signing any contract to ensure that it complies with the rules governing industrial relations in your area.