Finances are an integral component of any business. And for this reason, every company needs an efficient accounting system to gauge its current monetary status. If you’re setting up a new enterprise, consider establishing a practical bookkeeping system early enough in your business development process. In order to accomplish that, here are five steps you can take:
1. Incorporate Bookkeeping Software
Manual bookkeeping can be a daunting task. You have to do laborious data entry work and ensure accuracy all the way. This can be time-consuming, and you may end up frustrated if your figures fail to add up.
On that account, you may opt to automate your work by purchasing accounting software. This would help simplify your bookkeeping process. With the application, you can quickly prepare professional financial statements you’ll use to analyze your business trends.
You’d also want to ensure that the software you acquire is user-friendly, especially if you’re new to the accounting world. You can then learn the basics and build up your proficiency over time.
2. Outsource Accounting Services
Even with accounting software, you should still seek professional services due to the importance of bookkeeping. A professional accountant is knowledgeable in the fundamentals of bookkeeping. They may spot what you miss and thus help you realize your accounting and long-term business goals.
However, hiring an in-house accountant may prove to be expensive when you’re still early in your business journey. For that purpose, you should consider turning to solutions such as inDinero’s startup accounting services or similar ones from other providers.
Regularly outsourcing accounting services will prove beneficial to you in the long run as you’ll be able to manage your finances in the most efficient manner. What’s more, you’ll spend less than if you were to hire a full-time accountant.
3. Open A Business Bank Account
To effectively manage your business finances, open a different bank account to separate your business earnings from your personal money. A business account will ensure seamless bookkeeping of your company’s finances, and you’ll easily manage tasks such as tax calculation and payroll generation.
However, note that most banks charge a higher fee for opening a business account than opening a personal one. Therefore, research other viable options before you choose a bank. Additionally, you may consider other factors such as:
- The bank’s online or mobile banking capacities
- Transaction limits
- Level of security
- Customer support
You can also develop your account in stages to get the most out of it in the long term. You may start by opening a business checking account and then a savings account that’ll help you organize your funds. Next, get a business credit card to start building your credit score. A good credit score will help you secure a loan whenever the need arises.
4. Determine Your Payment Collection System
When you start making sales, you should set up a convenient method for your customers to pay you. Most customers are familiar with online and mobile payment services, so you may incorporate such solutions first.
Additionally, you could opt for billing and invoicing software from reputable billing companies. It’s advisable to have that kind of application since it integrates accounting services such as invoice generation, and it also accepts a wide array of payment options.
Provided you have an organized system for managing your money, you may use other payment options such as cash, checks, credit cards, and debit cards.
5. Track Your Company Expenses
An effective accounting system runs on a cash flow management framework. You should, therefore, regularly monitor your expenditure and income rates. For your business to grow, your expenses should be lower than your income. Otherwise, you’ll be yielding more losses than profits. If you make a business investment that sets your finances back, ensure that it’s a worthy venture that’ll yield a positive return on investment (ROI).
A proper way to control your expenses would be to keep the receipts for every business-related purchase you make. You may also incorporate cash flow management software into your system. And by all means, refrain from using business money to attend to your personal needs. If you do, keep a clear record of how and when you spent it and don’t throw out the receipt. Afterward, replace the money you borrowed from your business account as soon as possible.
When setting up a business, you need an effective accounting system to monitor your finances and help you gain profitability. You can achieve that by doing everything from outsourcing accounting services to using accounting software to regularly tracking your expenses for the sake of assessing your performance. These steps will help set you on a path toward achieving financial accountability and stability and, in the long run, driving your business to grow.