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?
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!