Anyone can start a business nowadays. Whether it’s turning a hobby into a business, providing a service for others, designing and selling your own products or making money online. However, one thing many entrepreneurs have in common is the feeling of dread that comes at the mention of doing their accounts.
While you could hire the services of an accountant to do it all for you, you could also save yourself a fortune by getting stuck in and doing it yourself.
With just a little research, some reading and some organized filing systems, accounting is actually one of the easiest parts of running your own business. Here is everything you need to know to get started.
Spreadsheets make everything so much easier. Set up right they can track your income and outgoings, do the maths for you and work out your cash flow. Having a spreadsheet system in place also means that all the information you need is there in front of you at the end of the year. This makes filing your tax return a breeze.
If you are an excel wiz, you could set these up yourself, if not, download a template and customise it to your business.
Understand Cash Flow
One problem many people have when they start out is failing to understand the difference between cash flow and profit. Cash flow is the money moving in and out of your company. Profit is what’s left at the end, once any expenses have been taken out. To run a successful business, your cash flow needs to be moving in the right direction. If you are finding that hold ups in pay are creating a cash flow jam, debt factoring could help by covering any gaps between issuing the invoice and receiving payment.
Keep all your receipt and invoices. It’s a good idea to save everything in the cloud, so it’s easy to find what you need. But, make sure you also keep any physical receipts. Implement a filing system that works for you and stick to it.
One of the biggest mistakes new businesses and sole traders make is leaving things. They think because they haven’t made much money yet; all this can wait. They don’t take care or don’t bother with accounting at all until they feel their income warrants it.
As soon as you are earning money, you need to register as self-employed and put both a filing and spreadsheet system in place. Start doing things right straight away, and you won’t find yourself desperately trying to fill in gaps later.
Accounting can be overwhelming, especially in the beginning. So, break it down and take one step at a time. As soon as you’ve found a system that works for you, start using it. Set aside a little time at the end of each day or week to go through your accounting, this way things won’t have a chance to get lost or forgotten. Getting into good habits from the start is the best way to keep on top of your accounts. It’s easy, I promise!