Starting a business comes with responsibilities; one of the most important but ignored responsibilities is bookkeeping.
Financial management has to be spot-on for a startup, to make sure cash flow is constant, taxes are paid, and growth is always on the horizon.
Startups could suffer from financial problems, late tax filings, or even complicated legal matters because of unorganized bookkeeping.
Most entrepreneurs focus on marketing, product creation, and customer acquisition while ignoring recordkeeping which is essential for the business.
Besides tracking expenses, bookkeeping is essential in making informed decisions, boosting investor confidence, and ensuring the business can sustain itself in the long run.
Effective bookkeeping saves time, and stress, and allows the startup to scale, regardless if funding is external or bootstrapped.
Here are seven vital bookkeeping tips for startups and entrepreneurs who need to know how to keep track of money.
1. Separate Personal and Business Finances
Mixing personal and business finances is a fatal mistake a new business owner can make. To keep financial records straight:
- A business bank should always be opened to keep finances separate.
- A business credit card should be issued to keep track of expenses and build business credit.
- To help simplify tax filing and avoid complications, attempt to keep personal and business finances distinct and organized.
- Clarifying financial boundaries will help maintain professional respect and assist during an audit.
Separate finances not only help with tax preparation but also help in securing business loans and attracting investors, who favor well-maintained financial records.
2. Use Cloud-Based Accounting Software
Manual bookkeeping is a thing of the past. These days, new cloud accounting software like EasyBooks, QuickBooks, Xero, or Freshbooks can help automate invoicing and expense tracking and generate financial reports. Some additional benefits include:
- The ability to pull financial documents from anywhere makes remote work easier.
- The ability to make real-time reports helps with decision-making and forecasting finances.
- The elimination of human error through automation of transactions and reconciliations.
Making investments in reliable bookkeeping will always ensure that your records are updated. This is crucial when dealing with tax authorities or seeking funding.
3. Track Expenses and Receipts Diligently
Proper expense tracking ensures all tax deductions are claimed, and there are no discrepancies in finances. Some best practices include:
- Accuracy: Expense categorization needs to be correct and thorough (office expenses, travel, marketing, utilities, salaries, etc.).
- Using digital receipt storage systems such as Expensify and Shoeboxed.
- Self-explanatory: Digitally storing documents ensures that important paperwork never gets lost and makes tax filing a breeze.
- Continually analyzing costs to find ways to optimize and maximize profits.
Helpful expense tracking also enables the smoothing out of bookkeeping for financial statements, which enables better representation of a startup’s performance to facilitate informed decisions.
4. Schedule Regular Financial Reviews
Do not wait till tax time to have a look at your finances. Review your finances monthly or quarterly to:
- Review bank accounts and ensure that all transactions made were authorized.
- Spot cash flow movements, possible obstacles, and financial shortfalls in the future.
- Fine-tune budgets and estimates of financial resources to be spent to achieve company objectives.
- Ensure timely payment from customers to have a healthy cash flow and manage outstanding invoices.
- Managing cash flow and outstanding invoices means actively monitoring late payments.
Frequent reviews help stem the tide of potential financial problems by flagging any suspicious financial behavior.
5. Stay on Top of Tax Obligations
Penalties can be given to startups that do not comply with state and federal tax laws. Some of these include the following:
- Knowing when to file taxes both quarterly and annually.
- Tracking expenses that can lower your tax bill.
- Finding a tax preparer for complex compliance filings.
- Regularly setting aside funds to cover filing so that you are not scrambling to find money.
Missing tax payments opens the door for hefty penalties, serious legal issues, and significant blows to your brand and company’s image.
Having compliance from the start is a financially sound decision.
6. Hire a Bookkeeper or Outsource Accounting Services
While self-managed bookkeeping is possible at first, hiring a professional bookkeeper or working with an accounting firm can:
- Save time and eliminate most mistakes associated with manual bookkeeping.
- Guarantee compliance with financial regulations and tax laws.
- Offer expert opinions for saving costs and strategies for business growth.
- Shift focus for the business owners from keeping financial records to business operations.
If it is not to your advantage to hire a full-time bookkeeper, outsourcing these bookkeeping services makes financial sense and gets the job done without the need for a part-time employee.
7. Plan for Future Growth with a Scalable Bookkeeping System
The growth of your startup brings a new level of depth to its finances. To set up a scalable bookkeeping system, you should:
- Implement integrated financial management tools capable of handling more transactions with ease.
- Develop standard operating procedures (SOPs) for handling financial transactions like paying vendors and receiving payments from customers.
- Establish a culture of regularly updating financial plans to suit the company’s business goals and market changes.
- Invest in keeping yourself or your team’s training updated with the best practices.
A scalable bookkeeping system safeguards the financial processes of a business from expansion, investor scrutiny, and plenty of compliance regulations over time.
Why EasyFiling is the Best Bookkeeping Service Provider for Start-Ups and Entrepreneurs
EasyFiling has clean and simple bookkeeping systems directed toward small businesses and new firms and that is why as an entrepreneur you should trust EasyFiling. Here are our reasons:
Affordable and Scalable Services: At EasyFiling, you will get all the services suited for a startup, scaling a business, and maintaining a business. The cost of these services is an affordable EasyFiling price.
Expert Financial Guidance: A strong record is kept of all goals and objectives that the business wants to achieve. Also, to further help your business, supporting taxes and other laws and regulations are carefully analyzed.
Seamless Cloud-Based Integration: With EasyFiling, there is no limit to when or where you can access your financial data because it connects to other popular accounting applications like EasyBooks, QuickBooks, and Xero.
Tax-Ready Financial Reports: With EasyFiling, your records are ready for any form of audit or questioning and EasyFiling ensures that your financial data is ready for any challenge.
Dedicated Support: For a small business or a startup, this service is of significant advantage as you are provided with a personal bookkeeper with extensive knowledge about your field to guide you in making financial decisions.
By outsourcing to EasyFiling, startups will always have a superior financial position while facilitating focus on growth and development.
Conclusion
Startups can either succeed or fail based on how good their bookkeeping practices are. Keeping this in mind, entrepreneurs and business owners can follow these seven bookkeeping tips to remain organized, and compliant, and channel their resources towards growing their startups.
To receive funding and attract investors for the long-term growth of the business, entrepreneurs need to have outstanding financial management.
Consider hiring professional bookkeeping services if bookkeeping feels too daunting. A financial system that is well-maintained will help a startup excel in the competitive business world.
Frequently Asked Questions (FAQs)
1. Why is bookkeeping important for startups?
Investors and lenders are more inclined to trust a startup that has financial records of their accurate cash flow management, tax compliance, and business decisions. Bookkeeping, in turn, helps all of this to be achieved.
2. What bookkeeping software is best for startups?
EasyFiling works best for startups as it is easy to fill, easy to keep records, and comes with a user-friendly interface, unlike other software such as FreshBooks, Xero, QuickBooks, or EasyBooks.
3. How often should I review my financial records?
Financial records for a startup should be reviewed monthly or quarterly to keep track of expenses, cash flow patterns, and accuracy.
4. Am I able to manage bookkeeping by myself, or do I need to employ a bookkeeper?
In summary, while you can do bookkeeping yourself, enlisting a bookkeeper or service like EasyFiling will be more time-effective and come with far fewer legal discrepancies.
5. What bookkeeping considerations do startups tend to overlook?
Some of the more common oversights are putting together business and personal finances, poor expenditure tracking, forgetting to allocate a budget for tax, and lack of periodic review of expenses and finances.
Nabin Adhikari
