There are a number of important areas you’ll be considering if you’re starting a new business, and accounting and related themes are at or near the top of any such list. Good accounting is a central part of the success of any business — on the flip side, a lack thereof will often doom your company from the start, even if other elements are in order.
At Singular Bookkeeping, we’re here to offer the very best accounting and related services for small businesses, including those just getting off the ground and looking for assistance. What are some of the simplest tips we offer to clients during the vital process of setting up and maintaining simple accounting and bookkeeping practices? This two-part blog series will go over a number of different themes.
Separating Personal and Business Accounts
One of the most important initial steps you can take is to make sure that your personal and business finances are completely separate. This may seem like an obvious point, but it’s one that’s often ignored or not given enough attention. A business is its own entity, and it needs to be treated as such from an accounting perspective.
Here are some specific themes to look at within this realm:
- State registration: First and foremost, you’ll want to ensure that your business is properly registered with the state in which it operates. This will give you an official entity to work with and help to ensure that your personal assets are protected in case of any legal difficulties down the line.
- Bank accounts: Once your business is registered, you’ll want to open up a separate bank account in its name. This will make it much easier to keep track of your finances and avoid any confusion down the line.
- Credit cards: In a similar vein, you should get a business credit card for your company — this will come in handy for making purchases and can help you build up business credit over time.
- Tracking expenses: It’s important to keep track of all your business expenses, both big and small. This will come in handy come tax time and will help you get a better sense of where your money is going on a day-to-day basis.
Selecting Accounting Method
Generally speaking, there are two primary accounting methods used by small businesses today:
- Cash basis: At the precise time expenses and revenues are paid or received
- Accrual basis: Recognizing expenses and revenues when they’re earned or incurred, regardless of when the money changes hands
There are pros and cons to both methods, and the best approach for your business will likely depend on a number of factors. Be sure to speak with an accountant or other financial advisor to get a better sense of which method is right for you. In part two of our series, we’ll go over some further tips in the realm of accounting as you start your business. For more on this, or to learn about any of our business accounting or bookkeeping services, speak to the team at Singular Bookkeeping today.