Starting a business comes with many challenges. But one thing’s for sure, now is the time to get your financial system in order while everything is fresh and new. It will be much harder to sort out your financials once the company is fully up and running.
In this article, we share a few tips and suggestions on how to avoid common mistakes and set up your business correctly from the start.
1. Before anything else you must understand what kind of business entity you have. Whether it’s an LLC, S Corp, C Corp, or something else, knowing this will help you to understand the financial implications when it comes to tracking your expenses and filing your tax returns.
2. Set up a separate bank account just for your business, keeping all business costs, income, and company expenses completely separate from your personal finances. This will make them much easier to track and ensure that there are no complications when maintaining your company’s financial records.
3. Once you’ve set up a business bank account, get a company credit card set up for all your costs and expenses. Using a company card for all of your expenses will make your bill pay process easy. Make sure to only use the card for company expenses! Mixing personal and business finances is a recipe for disaster at tax time.
4. As an entrepreneur, you know the importance of automating as much as possible, as you’ve more than likely had to juggle several different roles and responsibilities to reduce costs and get started as a small business owner. Using online business software for bookkeeping can help you automate a lot of tedious work, leaving more time for your other responsibilities without overlooking the importance of financial tracking.
Setting up a QuickBooks Online account will allow you to link your business bank account and credit card with your company’s financial records in one place to ensure easy access and visibility. All payments made on your company card will be automatically synced through QuickBooks, so you don’t have to input them manually.
5. Last but not least, start working with a bookkeeper from the beginning. It’s helpful to have a company card and use online business software, but without some accounting expertise and oversight, you can still run into problems.
A bookkeeper can help you to ensure that all of your accounts are correctly set up from the beginning. They can help you track owner equity, which is very important for tax deductions later. They should also make sure that your income statement is set up to allow you to see how long it will take to become profitable.