Money matters when it comes to managing and growing a startup company, and while your plate is always overly full, accounting isn’t something that you want to put on the back burner. According to a 2017 study conducted by the National Small Business Association, around 1/4 of small business owners spend more than 100 hours on taxes and other accounting needs. If you do the math, that’s more than two standard 40-hour weeks!
Thankfully there are many tips and tricks to make your accounting processes as efficient as possible. Keep reading to learn about the benefits of using invoice generator software and other tools to make accounting feel like much less of a hassle.
1. Choose an Accounting Method
There are two ways to tackle accounting: cash or accrual, though cash is the most common method. When using the cash style of accounting, you’ll need to pay close attention to the flow of money. You’ll notate revenue when money comes in, and notate expenses when money leaves the company.
Using the accrual method of accounting, money is notated when it’s earned, which may not be the same time money comes into the company. If your business earns more than $5 million a year, the IRS requires that the accrual method be used. This method is also required for businesses that maintain an inventory and have gross receipts of more than $1 million annually as well as publicly held companies.
2. Track Expenses Early On
Tracking business expenses is not only helpful during tax season, it also allows you to monitor the growth of your company. Keeping tabs on business expenses starts by following the right bookkeeping process. In order to understand the financial direction of your company, you’ll need to create financial statements, track deductible expenses, and prepare tax returns.
It’s best to track expenses as soon as possible. Even though you may not have too many as a startup, the sooner you start, the more accurate your financial projections will be. Early expense tracking also makes tax preparation much easier.
By getting ahead of accounting, you can minimize the headache and hassle that comes when you play catch-up.
3. Use Invoice Generator Software
Invoice generator software is one of the most important technologies when it comes to business accounting. Using invoice generating software allows you to track and create invoices with ease.
One of the biggest benefits of this accounting software is that you can create and manage invoices at home, in the office, and even when you’re on the go. Invoice generator software gives you the ability to create, print, and email invoices using a streamlined process. What’s even better is that the software is designed to customize invoices on the fly, a feature that’s very helpful if you offer a range of products or services.
Other notable benefits of this type of software include:
- More efficient invoicing process
- Reduced paperwork
- Ability to send many invoices simultaneously
- Organized billing data
- Ability to track expenses
By embracing the automation that invoice generator software provides, you’ll have one less manual task to worry about. This means more time focusing on growing your start up.
4. Maintain a Budget
Just as you create a personal budget for your own spending, you’ll want to do the same for your startup. Sit down and plot your business’ expected income and expenses in the future. This way you can have a good understanding of your business’ cash flow.
By having a monthly budget that runs through the end of the financial year, you can track projected numbers with real ones. This allows you to monitor your startup’s progress and make any adjustments to the budget as needed.
5. Consider Hiring an Accountant or Bookkeeper
Startups don’t generally have a lot of overhead or extra cash to hire too many employees early on in the game. But, when deciding what positions are worth hiring first, definitely put an accountant or a bookkeeper at the top of your list.
Unless you have in-depth knowledge in regards to what it takes to deal with a business’ finances, it’s best to hire someone who knows. To start, hire a bookkeeper who will be able to get you off on the right foot with an effective record keeping system. Bookkeepers are also able to produce financial statements and handle any financial transactions.
As our business grows and develops a more complex structure, you will want to invest in an accountant, who can take on more roles such as payroll and taxes. By having someone on your team to deal with the numbers, you can have peace of mind that your startup is financially sound.
As a startup owner it can be easy to get caught up in branding your business, finding new leads, and perfecting your company’s website, but it’s even more important to have a thorough understanding of the numbers. Accounting is the backbone of success for any startup, so be sure to follow these tips to start your business on the right path from the get-go.