If you are just about to launch a business of your own or if you already own one, having basic knowledge about accounting is important and can make or break your business. A business includes several satisfying milestones and a huge cash flow that can become hard to manage sometimes. You will need to get on top of accounting tasks that come before you when owning a business of your own. However, it cannot be as difficult as it sounds. There are many companies like Xero accounting Singapore that provide you with flexible solutions to take care of all your business accounting needs. However, that does not mean that you cannot do it yourself. With the right knowledge, it can be an achievable task. You could also look into getting a degree in accounting to get a better knowledge of what steps to take. But if you are someone who does not have a degree and owns a small business, there are certain steps you can take to set up a proper accounting system that you can follow and include in your practices. Today we are going to share some of these steps with you. They are listed as follows;
Open Up An Account
If you are starting a new business, the initial step to do would be to open up a bank account in a bank of your choosing or if you already own a business and do not have a business account, you should up one up immediately. Having a separate bank account for your business will help you keep a record of records that will not coincide with your financial data and will make it easier for you when it comes to filing income tax. Start by opening up a business account in your bank of choice and consider getting a business credit card and start building business credit. Businesses that have a partnership between two parties are legally required to use a separate credit card to avoid involving personal and business practices. To open up a business account, you will also have to register your company with your province or state. However, you should ask the bank what documents they need to open a business account for you and do things accordingly. Opening up an account is the most important step if you want to keep a record of your cash flow.
Introduce A Book–Keeping System
Before we jump into using a book-keeping system, we should know what exactly it means. Book-keeping is the process of tracking day to day transactions, organizing them and compiling bank statements. It is the most basic thing you can do that is included in business accounting. Accounting is usually done by looking at the bookkeeper’s data which is then used to create financial statements. So, have a proper book-keeping system is a must for any business. You can go old school and write down all the daily finances on a piece of paper and categorize them in files according to days and months, or you could use computer software like Microsoft Excel to create a spreadsheet of such daily financial data. You could also outsource it to other companies that specialize in keeping books of your financial data, or if your business is on a large scale, you could also hire an in-house bookkeeper to do all these things for you. A bookkeepers record usually includes cash related transactions that are done on a daily bases, that is if you choose to deal in cash. An accrual method is also used when transactions occur through a bank. Businesses in America can use the cash method if their revenue is below 5 million dollars. If the revenue exceeds this limit, they must use the accrual method.
A Payroll System
When you own a business, you will have several employees working for you. You will need to pay these employees on a monthly bases. For that, you will need to set up a proper payroll system that you will use to pay these employees. You will also have to recognize whether a person that is giving you certain services is an employee of your corporate or an individual contractor. For employees, you will need to set up a payroll schedule, and you will need to make sure that you are withholding correct taxes. There are a lot of companies out there that can help you with this process. For individual contractors, you will need to keep a record of how much you are paying them. Businesses in America may be required to file their 1099s for each contractor annually. You will also be required to keep their names and addresses for this purpose.
Import Taxes
If you are a business that imports goods from other countries to sell at your store, there will be certain amounts of import taxes and duties that will be implemented on you, and you will have to keep that in mind when you make up your financial statement. There will be certain fees that the government charges for importing goods for you through air or sea. You should go online on your government’s website to know what type of fee they charge for importing goods as it usually varies from country to country. An online duty calculator can also help you know what type of fee your government will charge you which you can then incorporate in your business plan or financial statement.
How You will Get Paid
Determining how you will get paid when the sales come rolling in is one of the most important steps in making accounting decisions. If you are accepting cash payments, you can use pos sale terminals to keep a record of these payments on a daily basis. Usually, these pos terminals can generate a slip of how much money has gone into the till which you can later enter into you financial statement. However, if you are also accepting credit cards, you will have to set up a merchant account with your bank. A merchant account allows you to accept payments from credit cards and banks usually charge 2.9% of the total transaction amount on every transaction done through a credit card. Setting up a mode of accepting payments is a crucial thing to know when accounting for a business.
Sales Taxes
When a customer walks into a store, they pay a sales tax amount to whatever state or province they purchase in. It does not matter if they live in a certain city or they are visiting from someplace else, they will have to pay this amount. As a store owner, you will have to start collecting Government Sales Tax (GST) from customers, when you have annual revenue of 30,000 dollars or more. This is a legal requirement every store or business owner has to fulfill to avoid any kind of trouble from the revenue department. If you are selling internationally, you will often be exempted from this kind of tax. However, this may vary from state to state or province to province. Be sure to check out what the rules and regulations are for GST in every state and adjust it into your accounts data accordingly.
Calculate Gross Margins
Improving your business’s gross margins is the first step to bring in more revenue. To calculate gross margins, you will have to know the cost incurred to produce a product. These usually include the material rules in making that product and the cost of labor that was used during the production of it. A gross margin is the amount of money that was kept after all the production costs. You can calculate the gross margin percentage by subtracting the amount of revenue from the cost of goods sold and then by dividing it with the amount of revenue. The difference between how much you have sold the product for and how much you bring at home every day will decide whether your business flourishes or not. It is one of the most important things to consider when you are taking accounting decisions related to your business.
The Final Words
Having the know-how of what basic accounting steps you need to take when you are a business owner is a must if you want it to succeed. Whether it be setting up an efficient payroll system or keeping track f your financial data. It is achievable, and you have to start someplace small and at the heart of it. Today we have made you aware of some steps you can take to make business accounting easy for you and help you in taking the right decisions so that your business or company can flourish in the foreseeable future.
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