Startup Businesses: Get Your Finances in Order (in five easy steps)

Examining numbers and finances may be one
of the least glamorous aspects of starting a business — but they are definitely one of the most important! Startup companies need to be organized, diligent and honest when creating data for their projected finances. Without realistic numbers, a new venture could be in trouble before its launch. So what is the best way to get organized? What data will you need to get started?

Writer Gwen Moran, co-author of The Complete Idiot’s Guide to Business Plan, interviewed New Jersey-based CPA Gail Rosen about the top five steps to getting your business finances in order.

Five Steps to Organizing Your Business Finances

To save you time and money in the startup process, it is helpful to evaluate certain things in order to know how to best move forward and ensure a smooth start to your venture:

Be thoughtful before organizing: Rosen notes that many businesses may be incorporating wrong from the beginning; it is important to understand your business and the different types of entities (sole proprietor, partnership, S Corporation, C Corporation, or limited liability corporation); you cannot change the designation after paperwork has been completed, so it’s important to know the structure of the business from day one

Know your tax responsibilities: each state has different tax responsibilities for different types of businesses; be sure to do some research and ensure that you’re adhering to all state tax laws, such as state/local payroll taxes, corporate taxes, and sales tax; if you have employees, issues such as workers’ compensation or other insurance may be relevant to the planning process

Budget and track expenses: this seems like a no-brainer, but it is crucial for startups; when doing business, you always want to track your expenses; this can lead to better cash flow for the business and can also assist you in identifying deductions at tax time; if you’re not quite ready to hire an accountant, there are many computer programs out there that can help you track and analyze your business expenses

Use technology to your advantage: a solid computer program to track your expenses and create a budget is good for the business; this will save you time (and most likely money) in tax season, will reduce the amount of paperwork you keep you have around the office, and can help you to code/organize expenditures such as receipts, mileage, supplies, etc.

Establish good bookkeeping practices: when getting started, a business owner may feel the need to generate sales and establish marketing right away to generate revenues; it is also important for an entrepreneur to follow good financial management practices from the very beginning; waiting to get organized and track expenses/income can be costly for a new business

Although the ‘numbers’ aspect of your business may be daunting, there are many resources available to entrepreneurs and startup business owners that can assist in making good decisions and staying organized financially. Proper advance planning (determining what type of business to be) can save you money before even launching, and diligent bookkeeping is essential for things like tax deductions, expense and income tracking, and overall financial projections.

To read the complete interview, as posted on Entrepreneur.com, visit http://www.entrepreneur.com/article/223729.

What are your favorite ways for staying financially organized? Please feel free to share your startup tips for managing finances!

Thanks for reading, and until next time… stay WISE!

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4 Responses to Startup Businesses: Get Your Finances in Order (in five easy steps)

  1. For many new business owners (including myself) I think taxes are the biggest area we forget to consider with our finances. I can’t understates the value or a good tax attorney to keep you on track!

  2. Yes as a attorney specializing in taxes and start ups I can say it’s one the major mistakes start ups make is to think that they will worry about taxes and accounting after they “get going” a little bit. If you’ve not planned right from the start to understand the issues and special considerations that exist for any news business, your’s included, it will cause you problems in the end.

    I see everything from poor records and mistakes in accounting reports to the wrong business entity chosen show up when it’s time to file that first tax return and it’s too late to do much about it but clean up the mess. Even worse is that it’s very costly and troublesome to correct or change a business entity choice “after the fact”.

    So do your self a favor and consult a good tax and general accountant BEFORE you finish setting up any business entity and save yourself headaches and money later on. Taxes and accounting aren’t things that you can afford to get wrong.

    And remember sites like Twitter, Linkedin, FaceBook, and other social media sites are full of professional people, including myself, quite willing to answer your questions or give guidance.

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