If you have a recent start-up business, or you’re entertaining the idea of starting one, then you will need a regular accounting of your business activities form the very beginning. This will include that accounting of all the incoming revenue and outgoing expenditures. That means you will have to open at least one business bank account. Depending on the nature of your business, its setup and the personal needs and requirements of the owners and investors, other accounts may be setup later. Business & Financial Solutions is here to help you and direct you as necessary, to help minimize your efforts.
In your first steps of setting up the business, you will have already created a legal business entity. The steps and process by which this is done is dependent upon a few things. This includes which state your business can stay is formed under and the nature of the business. You will also have obtained a Federal EIN number for the business entity. In order to open your bank account you will need to carry a certified of your business formation documents, along with a copy of the letter from the IRS, showing your EIN number.
Upon opening your bank account all business should be conducted, wherever possible, from within your bank account. That means all checks or debit purchases should be made through the bank account. Of course there are exceptions. An example of this would be if your company has established credit card accounts. In this case you may prefer to conduct a great deal of your transactions for purchases via credit card.
All successful businesses have a system for maintaining their bookkeeping and accounting. This pertains to veteran businesses and start-ups alike. One of the most commonly used systems is a software package called QuickBooks. By far, this is the most preferred software package for most of our small business clients here at Business & Financial Solutions. Many of our clients prefer to purchase the software package. Others prefer to use the licensed packages on our servers. There are benefits to both. Regardless of the software package that you may use, in is important to have constant and consistent method of tracking income and expenses. I can’t stress enough the importance in maintaining your accounting on a regular basis. There are multiple purposes for this.
Every company, whether it is a start-up on ongoing concern, needs to be able to review their financial records at least quarterly, but preferably monthly. There are some companies that really need to have a weekly accounting of their books. Efficient record keeping is one of the best ways that a business owner, CEO or manager can determine how well or how poorly his or her business is doing. Otherwise you are always taking rough guesses and don’t truly know the stability of your business until the end of the year. Additionally if you’re waiting until the end of the year to get your financial reporting in order to prepare a tax return, it will take more time and effort to get the tax return prepared timely. There will be a good chance of getting 1099s and other tax forms done late, which results in late penalties with the IRS and your state government. These tax forms cannot be completed without the books being brought up to date.
Secondly, in the event that your business needs a loan, it will be impossible for you to obtain such a loan without providing financial statements to your bank. No lending institution is going to provide funding without current financial statements. Failure to provide these documents to your bank in a timely manner may in itself raise red flags to the institution. Getting an accounting firm to bring a year’s worth of financial statements up-to-date in such a short period might propose certain challenges.
Lastly, if there are multiple owners, members, shareholders or investors in your business, each will or should want to see regular financials on the company. The only way to provide the monthly statements is by maintaining an accurate accounting of the company’s activities. This not only helps them in making decisions, but assists them in knowing the outcome of their investment. No one wants to stay on a boat that is not going anywhere, or even worse that is sinking. Your Financial Partners will want to see these financial records on a regular basis.
Those are the basic reasons for the need for regular bookkeeping and accounting for your company. This is an important. You can get into more in-depth accounting practices, particularly when it comes to job costing for multiple projects for one company. This is often necessary for contractors, where they have more than one job site, and there is a need to track the income, expenses and profit of each individual project. But that is a discussion we will save for another blog.
Don’t be caught off-guard, and don’t hold your business back. Call us at Business & Financial Solutions for a free initial consultation. Let us discuss how we may be able to work together in meeting the needs of your new start-up. Call (855) 557-2222, or email [email protected].
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