Most of you would think that startup businesses don’t need to do accounting since they are still in the initial stages of the process. However, having this kind of assumption can do more harm than good. Proper accounting is one of the basic tenets of a successful business, so even as a startup, you should already incorporate it in your business plan. It’s a good idea to choose an accountant who has their own financial services license or who is an authorised representative of a financial services licensee like Capstone.
Here are the reasons why:
1. To help you with taxes
When you start a business, you need to do a lot of things before you can begin—permits, inspections, and business plans are just some among many others. You also need to register your company in your local area to obtain a business license, and you’ll be taxed. Hiring an accountant during startup will give you an idea of how much tax will be imposed upon registration of your new business.
2. To establish your business capital
If you’re new to entrepreneurship, the only thing you usually know is that you need to have a capital investment to start a business. However, if you already picked the nature of the business you like to work on, you might be in a situation where you’re shelling out more money aside from your budget to accommodate things you need for your business.
Hiring an accountant will prevent you from having unexpected expenses during the initial stage of your business. Accountants have the knowledge and experience in handling these types of issues, and can give you advice and recommendations on how much money you need to allocate to start your business. They can anticipate and itemize the types of expenses and breakdown all the costs.
3. To help you come up with a better business plan and system
An accountant will help your new business become established and grow in the industry. During the first few months after your business becomes fully operational, your accountant can track your income and expenses, and you can get an idea if your business is doing well.
Your accountant will be able to determine the cash flow in your business. A successful business should have a higher influx of cash flow compared to the outflow. New entrepreneurs might not have an idea of how to observe this type of trend, which is why keeping an accountant even at the beginning stages of your business comes in handy.
If you’ve hired staff, you have to create a payroll system to keep them well-compensated. Having an accountant will help you set up the tools and format needed to compute their monthly salaries, and how this information can be incorporated into your financial report.
4. To manage your books
Your business should have a record of all the transactions you have done so that when you need to account for something, you can easily track it down by referring to the books. If you’re a business owner, it’s quite tedious to update the books yourself if you’re already handling staff management, inventory, marketing, and product development. It’s best to leave this task to your accountant.
The earlier you can do bookkeeping for your business, the better and less of a hassle it is for you. It’s a challenging task to backtrack previous transactions if you incorporate accounting a little later, especially if your business starts growing.
5. To handle legal stuff
You don’t want your business to close down because of legal sanctions charged against you. You want a business to stay and be well-established for long years to come so you’ll have a steady source of income.
If you’re new in the business, you might not have enough knowledge of what legal responsibilities need attention. You might end up facing legal issues of tax evasion or negligence. To avoid that, you need to have an accountant who will keep your business from experiencing these terrible situations.
Accounting is not just limited to the financial management for startup businesses but also deals with compliance to the law and policies that pertain to business and taxation. Accountants can also prepare legal documents, such as financial statements, if you are planning to look for investors or are applying for loans.
Having proper accounting even during the start of your business has a lot of benefits. It will help you not just keep track of the money coming in and out of your business, but also with other matters such as legal obligations, taxation, and systems that will enable your business to run smoothly. You should already incorporate accounting during the initial stage of your business planning so you’ll have an idea how to manage your business capital and overall expenses.