Accounting is often not business owners’ favorite thing about entrepreneurship but it has to be done. Here are 12 things you can do to organize your business accounting process so that it’s less stressful later on.
- Open a business bank account. In order to open a business bank account, you have to legally register your business with the IRS and obtain an EIN. It’s a good idea to open up a savings account at the same time to plan for taxes and build credit.
- Track your expenses. For legal and tax reasons, keep your personal and business expenses separate. Keep copies of all invoices and receipts.
- Establish a bookkeeping system. Bookkeeping can be done by hand, with software (e.g., Quickbooks, Freshbooks, Excel, etc) or through a third party. Hiring someone outside of your business to your do your business accounting gives you a fresh pair of unbiased eyes on your finances.
- Figure out payroll. Decide if you want to hire employees or contractors. With employees you are required to schedule and pay employer taxes as well as calculate withholding. Contractors require businesses to fill out a 1099 at the end of the year. Both methods and processes can be accomplished with the use of software.
- Consider import taxes, if you need to.
- Determine sales tax. With brick and mortar businesses, sales tax is determined by the location of the physical store. With online sales, sales tax is determined by the business (origin or destination based).
- Calculate gross margins. This will help to determine if you are pricing your services correctly or where there may be problems in your cash flow.
- Choose a way to get paid. Merchant accounts like PayPal, Stripe and Square allow you to accept credit cards and ACH payments
- Plan for tax season. Tax rules are determined by business structure, or entity type. You will also have to pay self-employment tax in addition to tax on your revenue. If you think you’ll owe more than $1,000 in taxes, the IRS states that you must make quarterly payments.
- Consider hiring a team. Use people for their specialities. CPAs are the only precessional qualified to help you in case of an audit. Accountants can help with bookkeeping, business plans, licensure, permits and financial statements.
- Consider financing. If you’re having troubles with cash flow, applying for a loan or credit card could benefit you.
- Re-evaluate your plan and goals.
Things are constantly changing and as you grow the rules of business accounting will change too. It’s good to review your plans and goals at least once a year to make sure everything is still working as they should.