In today’s time, the moment entrepreneurs launch a venture, they get busy participating in the race to success. However, we have seen that many founders or co-founders start their business and keep themselves busy in promoting their product and forget to establish the basic payroll needs of the firm, which can create significant problems in the future.
With this write-up, we plan to help you understand the importance of accounting.
This infographic enlists some basic business accounting steps, which should help you start things off.
Now, let’s explore the aforementioned points.
The first and foremost thing to start with is to open a bank account, a place where you can put your money and from where you can take your money out.
Having different bank accounts will make your life easier like for tax payments, vendor payments, receipts from payment gateways, receipt in cash or through cheque.
Once you register your company or firm, you can open your bank account with the help of pan card application and registration certificate quickly.
Before going for opening up of a current account, let us tell you that please compare all banks fees and features they give you.
Related Article: 7 Things Startups Should Keep In Mind While Filing Tax
To Know About Your Expenses
To start a business with a solid base, you need to know about your expenses, that what expenditure most incurred in your business. You should have a proper system of keeping all your bills and other important records.
This is the most important step that allows you to monitor your growth and helps in knowing the financial position of the company at any point of time.
Some of the expenses which mostly incurred – Food and Beverages, Entertainment expense, Courier Expense, Conveyance, Repair and Maintenance expenditure.
Identify Your Vendors
The next step is to determine your vendors. Make a list of them and ensure to keep a proper record of payments and purchases. Also, it is good to verify your balance in vendor’s account at the specified point of intervals.
Maintain Data About Your Customers
This point is also crucial regarding the growth perspective of the company; you need to verify your product types, and accordingly you should tag your clients with the products they have bought from you. Also, this exercise will help you in upselling of other products to your existing customers.
Develop A Book-Keeping System
Bookkeeping means recording of your day to day transactions, categorising them in their heads and reconciliation of banks with your accounts.
As you are new to accounts and your business, you should choose an accounting method.
There are three methods you can use
- Do It Yourself (DIY) – You can choose to go the DIY route and use software like Quickbooks or Tally, or you could use a simple Excel spreadsheet to maintain your accounts.
- Outsource the Accounts – You have the option of using an outsourced or part-time accountant that’s either local or cloud-based like Hubco.in.
- Hire an Inhouse Accountant – If your business is big enough, you can opt for an in-house accountant for your company who can do all your work under your roof.
Identify The Method Of Accounting
After establishing your system, you need to determine the basis of accounting you should follow in your business-
- Cash Method: Income and Expenditure are recognised/booked at the time when they received or paid.
- Accrual Method: Income and Expenditure are recognised/booked at the time when the transaction occurs irrespective of the fact, whether cash received for the particular transaction or not.
If we see practically, more than 95% businesses use Accrual method of accounting as it depicts the actual profit or loss of the company throughout the year.
Set Up Payroll/HR System
As you are new to the business, and you are not in numbers that cannot manage but as the time passes and business grows you need to hire employees and for them you need to decide their rosters, salaries and also take care of any tax part that this deducted from their earnings.
Keep A Track Of Your Taxes
In business, always you need to take care about your growth hindrances, and also, you need to take care if any penalties or any Government compliances you need to do.
There are some taxes which you need to take care as and when applicable on your business like Service Tax (If you are a service provider), Sales Tax (If you are a Trader), Excise(if you are a Manufactures) and so on. These taxes needs to be taken care crucially as if this is not followed you need to end up paying high penalties and bear real punishment from the government.
Improvise As You Go
Like practice make a man perfect, as you start with simple keep-ups in a spreadsheet, and as you go, you keep on changing your record keeping methods, your transaction booking methods. The more time you give to accounting, the more time you save for your business.
Hire An Expert When Needed
There was a saying “Of Course I talk to Myself; Sometimes I need an Expert Advice.”
This saying is faithful to some extent and under some situations, like if you are unable to maintain your accounts properly, or it was difficult for you to handle the tax and compliance part, then you should be advised to go with an expert.
In the market, there are various accounting and compliance firms available with which you can opt for.
Focusing on your product growth is important but at the same time you should not forget to make your foundations strong. As I said earlier, “The more time you give to accounting, the more time you save for your business,” If you follow these points, it will surely help you in adding up growth in your business.