by Michael Lodge
So you had an idea for a business and now you are getting it started. Two things that is important in your life – a good attorney and an accountant. The latter is important when you start because you have to organize your accounting structure so you are getting reports to understand how well your business is doing. It isn’t about just cash in the bank, it is about the score card of the income statement and the balance sheet. When you start a new business here are items you need to think about.
- Hire a good accountant, meet with him/her and get a business accounting plan in place.
- Open up a bank account. If you have opened up a C Corp, LLC, S-Corp or started a partnership, you have filed with your states Secretary of State your formation forms. They will come back to you in a few weeks with a stamp on them and a start date. You then get a Federal Identification Number. You are now ready to go to the bank. and open up a business bank account. Order your checks and you are ready to start transacting business.
- Expense documentation. Every business can be strong by documenting all expenses. Right from the beginning you need to establish an organizational system for all invoice and receipts you are paying. Keep it organized, log them into an accounting system or give them to your accountant to keep track of. The better organized you are the better you can manage your cash flow.
- Accounting Systems have got to be put in place. Make sure you sit down with your accounting firm, which should have been your first hire, and go over what is needed as in an accounting system. Talk through with your accountant what your company is all about because it will determine the accounting system you will need and the processes you will need to adapt to. There are easy to use accounting systems that makes it easy for you to use, but consult with your accountant before purchasing a software system.
- Taxes. Sit down with your accountant and go over the tax issues that you will have to deal with. Sales and use tax, payroll, import tax, and the list goes on. There are many tax issues to plan for and to report on a monthly basis. Your accountant can guide you through the process – do not ignore it. Once taxes get out of control and behind in paying, penalties and interest get big.
- Understand your financial statements. Sit down with your accountant and go over how to read financial statements, how to look for mistakes, what does the balance sheet say, and the statement of cash flows. It is final that you understand the score card of the income statement and the balance sheet is telling about your company. Remember, at some point in time you may have to give your financial statements to an investor or a bank – you will need to know how to explain them. Know your financial statements.
- Product Pricing. A lot of time small business owners sit down and come up with a price, and they usually figure it as what they purchased it for with a profit margin built on. But have you look at the price and included the costs to operate your office, insurance, payroll etc and what the final profit margin should be. If you are not covering your operating costs – you will see money tight. Again, sit down with your accountant and come up with a profit margin plan and how to include your costs of operating and at the same time keeping a profit.
Starting a business is a very big task and at time you may feel you have bitten off more than you can chew. But if you have professionals around you, a good team, you can find the answers and the correct way to get your business off to a good start. Don’t be afraid to ask for help and remember you will learn a lot as you go through the process. Grasp the knowledge and build more businesses.
If you have questions just call our office at: 877.778.1770 and go to our website at: www.icontaxgroup.com