4 Start-Up Accounting Tips for the Young Entrepreneur

The idea of starting a business holds tremendous appeal, and there is little that is more exciting to a young entrepreneur then knowing that the time is right and they’re ready to go.  By the same token, that first step can be a bit frightening, especially if there are essential areas of business where your skillset is lacking. Accounting is one of the top concerns for young entrepreneurs: for all of their knowledge and savvy about marketing and their individual area of expertise, the idea of not being able to keep the books straight is often what keeps them staring at the ceiling at night. 

The good news is that there is no reason to fear an audit, even if you never took an Accounting class. All you really need is to follow these four start-up accounting tips and you’ll put yourself on solid ground.

1. Get into good habits right at the outset. One of the keys to a successful business is to have a plan and to stick to it. When it comes to your business’ accounting needs, this means that you need to create a well-organized schedule of your accounting responsibilities and stick to the schedule. The faster you are able to establish good fundamental habits, the less you will need to worry about falling behind or getting caught off guard by inventory problems or cash shortfalls.
   
   With all of the automated calendar tools that are available today, it is easy to set up a specific time on a weekly or monthly basis to record all of your revenues and expenses and go over all of the appropriate paperwork and to balance your checkbook and your general ledger.  The other thing you need to do from the start is thoroughly understanding the different types of business entities and make sure that you have chosen the one that is most beneficial for you.
   
   
2. Equip yourself with accounting software that suits your needs. There are so many different programs available, and each has its own advantages and disadvantages. Though the recommendations of friends and associates certainly should be considered, you also want to make sure that the package you choose makes the most sense for the way you operate and for what your business is.
   
   If you’re always on the run and you never sit down at a computer, then a mobile setup probably makes the most sense. Take a good look at Xero. If you are a person who prefers to sit down at a desk with a laptop at the end of each day, then you would probably prefer a desktop solution. One of the most popular and flexible is QuickBooks Desktop. Or, if you run your entire operation from a tablet, you probably would prefer a package that is cloud-based. Look on the App Store for software like ShoeBoxed or FreshBooks.
   
   
3. There are some words you simply need to learn. If you’re visiting a foreign country, you prepare yourself by learning ‘hello’, ‘thank you’ and ‘where is the bathroom’ in the local language. The same basic requirements exist for entering the unfamiliar world of accounting. If you understand what a general ledger is and can talk to business associates about things like KPIs or accrual accounting, you will feel much more confident and appear much more competent. All of this information is readily available online, or in a basic business book that you can check out of your local library. Take the time to learn what the basic terms are and to get comfortable with their meaning and how they apply to your business.
   
   
4. Ask and accept professional help when you need it. There are a lot of very good reasons for using a professional and taking their advice, and keeping your books in order is one of them. As an entrepreneur, your tax situation will be far more complicated than it ever was when you were a W-2 employee: all of a sudden you will need to estimate and pay quarterly estimated income taxes, and if you have employees you will need to learn your obligations with reference to payroll taxes, tax reform and more. You don’t have to spend a lot of money to get some really valuable advice, but you may end up with unnecessary expenses if you decide to go it alone and make big mistakes. The Internal Revenue Service has no special rules for beginners, and you are just as likely to be audited as a well-established, multimillion dollar company.

Starting your own business is both an adventure and a big responsibility. Make sure that you are giving yourself the best possible chance of success by acknowledging the areas where you need help and giving yourself the support that you need. It can make a real difference.

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All Articles by Bob Mason, CPA