Submitted by: Peter Holtz, CPA

When starting up a small business, even if solely owned and home based, requires good accounting to keep it going and flourishing. Here are some success tips that can be valuable for startup business owners and entrepreneurs:

Choosing the right entity

There are various legal entities to choose from. The structure you choose will depend on various factors such as if you will have:

Partners or investors

Employees

Independent contractors

Substantial customers with big orders

The need to protect intellectual property and personal investments

Exposure to any lawsuits

There are tax and legal benefits and drawbacks to each of the entities so making the right choice at the beginning is very important.

Record keeping

Why bother to keep records? Is it in order to comply with the tax requirements, or is it so you know where you stand financially? The answer is – It is for both. A separate accounting system has to be set for the business. There are various accounting software programs that can help you do so very efficiently. You should consult with a competent CPA before you choose a program to work with. Inputting records might have to be done on a daily or a weekly basis, depending on the volume of transactions.

Banking

Set up a separate bank account for your business, even if you are working alone out of your home. It will help you manage your cash flow more easily and the records will be separate from your personal ones. Choose a bank that is conveniently located. Some banks have computerized check deposits for a minimal fee that could save you time.

It is important to have separate credit cards for the business and do not mix them up with your personal ones. This will simplify the record keeping. If you do happen to make a mistake and use a business credit card to pay a personal expense, immediately reimburse the amount.

Billing and collecting

Make sure you are careful about extending credit to customers. Your cash flow is your life blood and depending on the industry you operate it in, try not to extend the payment term to more than 30 days.

Your invoices should go out immediately so your customers can pay them as soon as possible. If you can manage to get prepayment before the work is done or the shipment delivered, that is even better.

When a customer is regularly late in paying his bills, consider cutting him or her off. That is very hard to do, especially if this customer brings in a lot of business, but it may be a decision that could save you time and money in the long run. Charge late fees to make up for the lost time and interest and if they still dont pay, hand the matter to a collection agency. It would cost you a few dollars, but on the other hand the agency reports to the credit bureaus and will affect the customers credit score. Have a policy and a procedure in place you can refer to when you have this kind of problems

Payroll

When you hire workers, know the tax code regarding employment. It might be smart to outsource payroll. Penalties and interest can be steep for late filing of your payroll tax returns and remitting the appropriate taxes to the various authorities.

About the Author: Peter Holtz, CPA specializes in providing accounting and tax services to small business owners and professional practices in Stockton, CA. For more information, go here:

financialperformancecenter.com

Source:

isnare.com

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