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Basic Accounting Concepts and Tips for Your Startup
Accounting is essential for startups because it provides information about the business's financial health. This information is used to make decisions about how to allocate resources and manage risks.
Startups must be especially careful with their finances because they often have limited resources and are more susceptible to risks. A solid understanding of accounting principles can help startups make informed decisions about how to best use their resources and manage their risks.
Here are accounting basics that every startup needs to know:
Bank Statements
Reconciling your bank statements means comparing your records of what has been deposited and withdrawn from your account with your bank's records. This allows you to ensure that there are no errors and that all your transactions have been accounted for.
Bills
As a new business, it is important to always pay your bills on time. This will help establish good credit with your vendors. Make sure to examine each bill that comes in carefully to ensure accuracy.
It is easy to accidentally pay an incorrect bill, so take care to avoid this mistake. To avoid these additional charges, keep a close eye on your accounts payable each week to ensure that all bills are paid on time.
You'll want to keep track of both big and small expenses like parking, postage, printing, and mileage. This way, you can make sure your deductions are accurate and have the documentation to back them up.
Credit Card Statements
Credit card fraud can happen without you noticing, especially if there are small charges. To ensure you're not being charged for something you didn't purchase, reconcile your credit card statements. This is especially important if you have a company credit card that multiple employees use.
Financial Statements
Printing out financial statements regularly can help you track your business's progress and performance. Financial statements show you how much your business is making (or losing), where that money is coming from (or going to), and what your business's assets and liabilities are. Your bank reconciliation should be included with your financial statements at the end of every month to ensure that your balance from your general ledger and your bank account match.
Invoices
Invoicing customers is essential because it allows you to request payment for the products and services that you have provided. Without invoicing, it would be difficult to stay in business for very long. This means that you should keep track of the money that people owe you and make sure that you send them invoices regularly. You should also follow up with them if they don't pay you on time.
Payments Received
Whenever you receive a payment from a customer, you should keep a record of it. This way, you can track all the payments you receive and make sure that each customer's payment is attached to their corresponding invoice. This is especially important if you're using a paperless office. You can avoid confusion or mix-ups by keeping track of all payments.
Payroll
If you have employees, you will need to track payroll. This includes managing employee personnel records, retaining employee time records, and handling all related payroll forms.
The most important thing when it comes to managing payroll is to make sure that all of the proper records are being kept. This includes keeping track of employee hours, vacation days, and other important information.
If you outsource your payroll to a service, they will typically handle most of this for you. However, it is still important to double-check that everything is being done correctly.
Proof of Payment
If your supplier calls to tell you that you must pay your bill before shipping any products, you can check your bank statements to see if the check has cleared. If it has, you can ask for a copy of the check to give to your supplier.
Tax Returns
If you are a new business, you likely have no tax returns yet. However, once you do, you must file them away and keep them for at least three years. It may be a good idea to keep them longer.
Conclusion
Basic accounting is vital for any startup business. Without a solid understanding of accounting, making informed strategic decisions about the company would be difficult.
If you need accounting services in Rye Brook, rely on Revonary Accountants & Advisors, LLC. We apply the highest levels of tax service and integrity to everything we do. Contact us.