With the average small business paying nearly $175,000 in fees following an audit, it’s important that any new business take their accounting seriously.
When you’re looking for accounting solutions, you shouldn’t think twice about hiring someone to handle at least your basic bookkeeping. Accounting for startups is tricky business but bringing in a professional can ease that burden.
Follow these 7 steps for a complete guide to accounting for startups.
1. Look For Experience
When you’re starting a new business, you need to take every effort to protect your assets and ensure you’re prepared for growth. While people who are new to any industry bring a lot of excitement and energy to the field, experience has its own special place. Experience provides a steady hand on the wheel when you’re trying to steer your ship through uncharted territory.
Hire an experienced accountant who knows a thing or two about working with startups. Find someone who you have a strong rapport with but who you feel like will provide you with valuable advice that you can take in and understand.
An experienced accountant will bring a sense of ease to your employees and to your board. Knowing that the finances are being handled by someone experienced and competent will build morale for your business. People want to know that there is someone capable at every level of the business.
An accountant who has worked with startups before will know where you should scale back and where you can afford to spend more capital. They’ve watched the money move at companies before and they’ll have learned a thing or two from some of the best.
2. Hands Off The Wheel
When you hire your accountant, you need to be able to avoid the most common bad habit of all business owners. Most business owners open their own business because they’re an expert in their field and have a special knack for problem-solving in their industry. However, they’re by no means a jack of all trades. The sooner you can learn that, the better off you’ll be.
You’ll need to take your hands off the wheel at some point and let your accountant start to handle things. Not only are you probably not an accounting expert, with a knowledge of the tax code from top to bottom, but you don’t have the bandwidth for accounting.
There are hundreds of things to manage every day for the average business owner and bookkeeping isn’t one of them. Even if you’re a small company that only needs a part-time bookkeeper, keeping track of invoices, juggling receipts, and processing customer payments isn’t up to you. It should be up to the person who handles your finances.
3. They Need Unlimited Access
Once you find an accountant, you need to give them unlimited access to your accounts. They need to be able to know everything you know about your finances and have power to make the decisions they need to make at a moment’s notice.
Keep an organized list of all of your accounts, your passwords, and all of the tools you use to manage your money. Take the time to organize everything for your accountant so they can have access to everything they need.
If you have employees, make them aware of who your accountant is, even if they never work together. Your accountant will be responsible for making sure your employees get paid, so they’ll be happy to pop their head in and say hello.
Let your employees know what kinds of questions they should bring to your bookkeeper so that they can spare you the trouble. If you’re busy gearing up for a spring push into summer, you can’t be worried about everyone’s tax returns. Let people know what’s in the scope of what your accountant does.
Be sure to let your accountant know what to expect as well. They’ll have a lot of responsibility for your company, and so they need to know what that means.
Put your accounting on autopilot
Schedule a free consultation today.
4. Take Suggestions
Your accountant will have suggestions for how you should allocate funds for building your business. While you may not agree, don’t reject their suggestions outright. You might realize later on that they had a valid point.
Take their suggestions and make them feel comfortable offering them. You don’t have to feel obligated to act, but you should also recognize that your accountant has expertise in a realm of experience that you don’t know anything about.
Your accountant should be like a financial advisor for your business. They’ve seen businesses do well and have seen businesses make mistakes. You should take their suggestions seriously and look deeply into any recommendations they make.
Most business owners put themselves in questionable positions related to their tax status by ignorance all the time. With your accountant at the helm of your financial dealings, they can ensure you don’t make any mistakes you could have avoided.
5. Choose Software You Can Collaborate On
You need to choose your software wisely when you’re starting to work with a new accountant. While you might be happy with what you’re using, it could be inefficient for the accountant that you bring on. You need to be working with software that works for them.
You also need to be sure that you’re using software that makes it easy for you to collaborate. Even if you prepare your accountant to use the system that you use, listen if they think there’s a better software out there.
Some business owners will get by using only spreadsheets for decades. While this is a system that works for some, it’s an accountant’s worst nightmare. The inability to automate tasks, calculate taxes, and itemize payments could frustrate your accountant.
Make their work easier by finding software that you can work together on. You might be just about to head to bed and realize there’s some important piece of information that you forgot to tell them. Rather than try to remember it for tomorrow, you could enter it into the system before bed.
This will keep your accountant up to date with all of the most pertinent information to ensure that your accounts always stay accurate.
6. Make Sure It’s Linked To Payroll
One of the easiest things to get in trouble for as a business is a violation related to payroll taxes. If you’re not paying the adequate amount, claim an incorrect figure or fail to report your figures on tome, you could end up in a serious situation.
The IRS could come and padlock your door until you pay your taxes. You could end up with massive fines piling up. You could even be forced to close your business.
You’ll find that you won’t be able to claim bankruptcy on your payroll taxes and will be followed around by that bill for an indefinite period. It could become a ball and a literal chain around your business.
In order to avoid putting your business in jeopardy, you need assistance from an accountant. They’ll be able to help you to anticipate any charges and start paying your taxes in advance. Instead of having to send one lump sum at the end of the year, you could start paying your taxes as soon as possible so that you’re not hit as hard.
Linking your accounting software to payroll also allows you to quickly and easily generate the tax forms that your employees need. The faster you can do this, the faster you can get that hassle off of your plate.
7. Write Off Expenses
A common problem with small businesses is that owners will often mix their work accounts and their personal accounts. Since all of the money comes from the same place in their mind, they often think it’ll work out in the end.
However, this behavior can snowball, and you’ll end up paying more in taxes than you’re required. You could be writing off all of your business expenses instead of paying for them out of pocket.
If you try to write them off having paid for them with your personal funds, you’ll find that you’re out of luck. You need to pay for things with your specific business account to write them off later.
Your accountant can help to advise you on maintaining this division and make sure you get what you deserve when tax time rolls around.
Accounting for Startups is More Complicated Than You Think
Because accounting for startups is a unique and complicated job for the average business owner, you shouldn’t try to handle it all yourself. Your employees, your business associates and your sanity will thank you. Hire a bookkeeper, even on a part-time basis, to make sure that your finances stay in order while you’re doing all the other important work of a business owner.
If you’re not sure whether it’s time start outsourcing your accounting to a third party, follow our guide to know.