Finance and accounting are essential for a startup. It helps you know how much money you have (and don’t have) to work with, and how much cash flow you need to make in the next month. While most people assume you only need to learn basic accounting things like how to prepare profit and loss statements or understand the gst no format there is a lot more to it all. There are times when it can be very confusing to understand what’s going on financially with your business. So to help you out here are some basic accounting lessons for startups that can help get you started on the right foot.
1. Open a business bank account
If you’re starting a business, you’ll need to open a business bank account. Your business money should be separate from your personal money, so the bank of your choice should be the only one holding your company’s money. It’s important to open an account with a bank that is willing to work with new businesses and has incentives for doing so. Look for banks that offer free checking accounts, low-fee debit cards, and low minimum opening balances.
2. Develop a bookkeeping system
The most important thing you can do to track your startup’s financials is to develop a bookkeeping system. A good bookkeeping system will help you keep track of your cash flow, expenses, and revenues. It will also provide you with an overview of where your business stands financially at any given time. You should be able to see how much money you have left over after paying for operating expenses and what percentage of sales you are making back in profit.
3. Keep track of vendor payments
You should also make sure that you keep track of all vendor payments so that you know when they are due and paid in full by the due date. This is especially important if you have vendors who require an upfront payment before delivery or service begins (such as a contractor or supplier). If this happens, then it is your responsibility to make sure that payment is received before the due date and that the invoice has been paid in full by then too! This also applies if you use some web services or need to pay for your hosting services.
4. Choose a method of accounting
The method of accounting should depend be based on the nature of your business. Many startups choose the accrual method of accounting, which means revenue is recognized when earned and expenses are recorded when incurred. This can be more expensive for startups because there are additional costs involved in keeping up with sales and managing payroll, but it’s a good option if you’re planning on growing quickly and selling in multiple countries.
5. Setup payroll system
Another crucial thing you need to do is set up a payroll system so you can pay employees, suppliers and others who work for your company. The best way to do this is through QuickBooks or another software solution designed specifically for small businesses. You’ll want to make sure that all information about employees is correct and up-to-date, so keep an eye out for changes as they happen.
6. Tax rules
It’s important to know how taxes work for your business because they can affect how much money you make. Try to get as much information as possible like the major gst rules, how to file gst nil return, what tax slab you are in, items exempt from gst and what type of structure is best for your company.
Businesses must file their own tax returns and pay their own taxes, but many startups don’t have the knowledge or resources to do so on their own. Instead, they can hire an accountant or bookkeeper who will handle these tasks for them. The cost of this service depends on how complex your finances are and how much time you want it to take up in your day-to-day operations (most accountants will charge by the hour).
