In today's time, as soon as an entrepreneur starts his venture, he becomes busy trying to win the race to success. While they are running this race by promoting their product, they tend to forget about the basic payroll of the firm, which can create significant problems in the future.
Here are some basic business accounting steps, which should help you start things off.
Bank Account The first thing that you should do is open a bank account and have different accounts for different expenses like for tax payments, vendor payments, receipts from payment gateways. Once your venture is registered you can open an account with the help of pan card, but before opening you should compare all bank fees and features they give you.
To Know About Your Expenses You need to keep a track of your expenses, in order to build a solid base, by having a proper system of keeping all your bills and other important records. This is the most important step that allows you to monitor your growth and helps in knowing the financial position of the company at any point of time.
Identify Your Vendors The next step is to determine your vendor. You need to make a list to keep record of payments and purchases and also verify your balance in vendor's account in specific intervals.
Maintain Data About Your Customers You need to verify your product category and according should tag clients with the product purchased by them. This will help you in selling different products to existing clients.
Develop A Book-Keeping System Bookkeeping means recording of your day to day transactions, categorising them in their heads and reconciliation of banks with your accounts. There are three methods you can use:
- Do It Yourself (DIY) You can do it yourself by using Excel spreadsheet or Tally
- Outsource the Accounts You have the option of using an outsourced or part-time accountant
- Hire an inhouse Accountant If your business is big enough, you can opt for an in-house accountant for your company who can do all your work under your roof.
Identify The Method Of Accounting Next you need to choose method of accounting between:
- Cash Method: Only cash transaction (Income and Expenditure) gets recorded.
- Accrual Method: In accrual method all the transactions (Income and Expenditure) are recorded irrespective of the fact, whether cash received for the particular transaction or not.
Set Up Payroll/HR System As you are new to the business, and you are not in numbers that cannot manage but as the time passes and business grows you need to hire employees and for them you need to decide their rosters, salaries and also take care of any tax part that this deducted from their earnings.
Keep A Track Of Your Taxes You need to keep a track of any penalties or any government compliances you need to do. There are taxes that you need to take care of at certain point in your business such as service tax, Sales Tax, and so on. If not taken care of, you may end up paying high penalties and bear punishment from government.
Improvise As You Go Like practice make a man perfect, as you start with simple keep-ups in a spreadsheet, and as you go, you keep on changing your record keeping methods, your transaction booking methods. The more time you give to accounting, the more time you save for your business.
Hire An Expert When Needed If you are not able to maintain your accounts properly or you cannot handle the tax and compliance part then you should be advised to go with an expert. It is a summarization of an article by Agam Gupta. For more details, visit https://inc42.com/resources/10-basic-accounting-lessons-startups/