After you’ve gone through the process of establishing your business, registering with the government, and obtaining a tax ID, where do you go next? With some basic knowledge and the right professional guidance, you can keep your business financials on the right track, ensuring your long-term success.
1. Open a bank account
The first thing you’ll need in order to effectively operate your company is a business checking account. Even if your business is a sole proprietorship, you simply must keep your business and personal expenses separate in order to prevent any IRS red flags. Read the fine print and look for a checking account with minimal fees and the option to link to a high interest yield savings account.
2. Apply for a business credit card
While your business checking account will grant you a business debit card, there will be times when you need to use a credit card for larger purchases. Decide on an account that will net you business rewards - the more flexible the better. Some cards let you use points for hotels or airline tickets, and some give you cash back. Make your business expenses work for you.
3. Choose your software
Choosing the right accounting software can save you massive headaches down the road. It’s a terrible feeling to get used to a system and then find out that your program will be no longer supported. QuickBooks is the industry standard, can work with many banks to import statements automatically, and has add-ons for payroll, inventory, and invoicing. QuickBooks is here for the long-term and is constantly adding features and upgrading its capabilities.
4. Set up payroll if you have employees
Paying your employees under-the-table may be a simple way of operating, but you’re breaking the law and risking your entire business to do it. Keep everything on the up-and-up and file the appropriate tax forms. Full and part time employees need a W-2 form. Independent contractors and freelancers need a W-9. Setting up direct deposit through your bank will save both you and your employees time.
5. Organize how you will accept payment for goods and services
The rule of thumb is to accept as many methods of payment as possible. Few people will be writing you checks these days, but you still need to be prepared for them. Cash management and record-keeping is crucial; cash has a way of flying out the door. You can accept credit card payments with a Square or Paypal reader for a small fee. If you are selling products online, you can use a site like Shopify with a built-in platform and payment center.
6. Know your tax obligations
You will be expected to pay quarterly federal and state taxes which increase as your income increases. If you don’t update the quarterly estimates as your income grows, you can be left with a debt to the government and fees for insufficient payments. Also make sure that you’re charging customers the appropriate amount of sales tax on taxable goods, which varies from state to state.
Should I hire a professional?
While some small business owners do manage their own finances, it can quickly become overwhelming and end with headaches, hassle and high blood pressure! It's a good idea to shift some of your financial duties to a trained professional so that things don't spiral out of control.
When you're trying to get your business off the ground, you may not have time to properly learn the ins and outs of business accounting. Hiring a professional team like JADDE Financial Solutions can potentially mean the difference between business success or failure. A pro bookkeeping/accounting firm can help you determine what financial details need immediate attention and those that can be postponed until your business experiences some growth.