Tuesday, 20 Jun 2023
Bookkeeping is an indelible part of starting and growing a business with time. It is needed to understand the utilisation of the working capital and track expenses. It keeps the business owner aware of the health of the entity and establishes how it fared in a given quarter. It allows them to make improvements for enhanced profits and sales.
Thus, when budding entrepreneurs are starting-up, the most significant hiring they need to do is recruit an expert bookkeeper. With professional help, managing finances can become easier for novices. Thus, here is everything you need to know about bookkeeping for start-ups that will help you make informed financial investments and expenditures. These tips will make you financially literate and better positioned to deal with monetary issues in the initial phases of setting up the business.
Bookkeeping for a new business involves keeping accurate and up-to-date financial records with the help of a bookkeeping system. The bookkeeper has to track every transaction and mention it in the general ledger to know the amount coming into the business and going out. A start-up has to utilise its working capital judiciously until the business starts making profits.
Thus, they use the existing human resource for multiple activities. A bookkeeper in a start-up becomes responsible for every finance-related task, such as payroll management, financial counselling, tax planning, inventory management and managing a positive cash flow.
Bookkeeping for start-ups is an exhaustive activity that aims to maintain error-free books for effective financial management. They have various other responsibilities on their to-do list. Let us look at them.
Like any business, start-ups have to maintain financial records for their business from day one. They need to organise them in sequential order and ensure all entries for incomings and outgoings are included. These include keeping records of all financial statements, safeguarding all bills and receipts, preserving business bank account statements and credit card statements and documenting all invoices and evidence of payments.
In addition, professional bookkeepers Melbourne maintain records of cancelled cheques and tax returns. Keeping these details helps to file taxes accurately, claim business tax deductions and determine the financial well-being of the start-up.
Another vital task bookkeepers perform is reconciling bank accounts to ensure the books have correct entries. It is done monthly or weekly, depending on the needs of the business. For example, retail businesses with many daily transactions must do it more frequently.
At the same time, manufacturing businesses with limited clients can do it monthly or quarterly. It ensures that cheques have been cleared and bills paid. It is also helpful in identifying fraud by employees and saves money.
Most expert bookkeepers rely on bookkeeping software for start-ups to maintain precise books and financial statement preparation. The commonly used software includes QuickBooks, Xero and FreshBooks. They ensure that the business and personal expenses of the founder of the start-up are separated from the beginning.
They use the software to prepare monthly statements, including balance sheets, income statements and cash flow statements. It keeps a check on the bottom line of the venture.
Invoicing on time helps to get payments from customers without delay. Bookkeepers are quick with the task and send them out as soon as the goods are delivered.
They provide all the payment information and links in the emails to help the customer make the payment. They are also responsible for following up with clients who have not paid by contacting them and reminding them of the due date.
If the start-up has employees, then bookkeepers in Melbourne ensure that salaries and wages are paid on time. They calculate the correct salary amounts and get them credited to the bank accounts of the workers. They deduct taxes and add incentives to provide the right amount to every worker.
Similarly, they are responsible for inventory management, ensuring the start-up has the required stock at any time. They process payments to suppliers to avoid late fees and conduct inventory analysis regularly to check damage or expiration of goods.
Budgeting can be tricky for start-ups because they do not have any historic records of expected and unexpected expenses. Thus, bookkeepers use their industry knowledge and calculations to determine the budget for the next quarter and the entire year. They must allocate budgets effectively to every department and make them restrict their spending to the assigned amount.
Budgeting helps business owners to determine how much money they need to spend to operate comfortably. It gives an insight into the fixed and variable costs to avoid unnecessary spending and maintain a positive cash flow.
Bookkeeping for start-ups is essential and must be performed by a professionally qualified and experienced bookkeeper to ensure accuracy and compliance with state regulations and accounting standards.
