A career is a funny thing. In the aftermath of the coronavirus pandemic, many more people have started businesses. More people are launching themselves into startups because they want to be their own boss and they’re passionate about what they do. The pandemic certainly forced a lot of people to reassess their priorities and their lives. However, it also means there are a lot of people starting businesses who don’t realise how to draw up accounts or appreciate the complexities that certain accountancy niches can throw up. Knowing how they interlink is vital.
You Don’t Need An Accountant Until You Need An Accountant
At first, when the business is in the early stages you’ll probably be able to do everything yourself. This includes filing your taxes, drawing up your accounts, etc. Unless you’ve launched with the help of a business incubator or high investment. You’ll only need one when things are getting on top of you. When it becomes clearer that it’d be better to spend your time doing what you do best: running the business. Accounts can take a long time and are quite bespoke. Especially if you’re dealing with complex issues like leasehold improvements or trying to conform to GAAP. When it goes beyond merely deducting expenses from the profit it can turn into a time suck.
Benefit From Accountancy Expertise
Sure, you’ll have to pay for an accountant or accountancy software. It’ll affect your bottom line. At the same time, you’ll be able to benefit from their expertise. There might be deductions you’re not taking into account, grants you aren’t aware of or government initiatives your business can benefit from. The trick is in finding the right accountant or software for the situation. Some accountants are better in some niches than others. For example, you might want a specialist in deferred rent accounting or someone to look at your business structure if you’ve got a separate company overseas and are confused about the accountancy relationship between the two of them. You’re going to benefit, but only if you put the research in to find the right accountant.
Good Bookkeeping Is Important From The Get-Go
If you start with a good habit things will be a lot easier down the line. If your bookkeeping isn’t up to scratch you can end up making things a whole lot harder when it comes to reporting income or trying to get a grip of your accounts. It can also cause you to make mistakes which can lead to underreporting income…meaning you might get into trouble with your relevant tax authority. To get around this, start practising good habits. Come up with a good measure to record all your income and outgoings and stick to it. There is software available to help you with this but of course, it can be expensive when you’re just starting out.
Accountancy Protects Cash Flow
You might feel like you’re having a great month but in reality, your cash flow might be a little slow. You need to know how much you have in your business accounts. This means you can purchase items from suppliers like raw materials etc. or even pay for business subscriptions you might have. It even affects being able to pay your employees on time and if you can’t do that you really will have problems.
Being careful and getting into a good practice can ensure that you protect your cash flow so that you have reserve funds if needed. When you start up this might be easier than you think but as you go down the line and things start piling on top of eachother.
The Power Of Forecasting
Forecasting is incredibly powerful. Knowing what’s coming up in terms of billing or calculating profits can be a huge benefit in the business world. If you know where you’re at in terms of your forecast you’ll know when you can purchase items or services to help grow your business, or recruit extra staff. It also allows you to observe when you’re going to be at your busiest. Once you’ve got into a good flow accountancy wise it doesn’t take long to be able to have an accurate and reliable forecast. After a while this might simply be something that is presented to you by the relevant software or accountancy firm and you can use it as a tool, instead of having to maintain it all by yourself.
Proper Profit Calculation
What you get paid isn’t your profit. Your profit is what you get once you’ve deducted all of your costs of sale from the mix. If you have a lot of costs of sale, this can be tricky to calculate. You need to keep everything ticking over and recorded properly otherwise you might miss things off and incorrectly calculate your profit. It can lead to you paying too much or too little tax and also throw off your forecasting. If you decide to eschew the standard career and become a business owner, being fastidious with your business calculation will do you nothing but good.
