Tips for Bookkeeping Establishment for New Businesses
Posted on: 27 November 2019
When you launch a new small business, you're probably excited and focused on your new venture. However, one of the most common reasons for small business failure is money management difficulty. If you're skilled in your business but struggle with bookkeeping and money management, you need to be prepared for the financial side of business management as well. Here are some steps you should take right away to get control of your new company's accounting.
Establish Business Accounts
The first thing you need to do to simplify your business management is to create separate bank accounts for your business. This will keep your business transactions separate from your personal ones, preventing that money from overlapping. This is important because you can inadvertently dip into company funds for personal purposes and find yourself short for company expenses otherwise. Additionally, when you muddy the waters of your personal versus business finances, you risk errors in your tax accounting and reporting.
When you establish the bank account, you should open up two accounts. You will need a business checking account as well as a savings account. The savings account should serve as a reserve account for your tax liability. Move your tax funds to the savings account as the tax liability is incurred so that you can always pay your taxes on time.
Create Strict Collections Policies
One of the hardest parts of running a new business is maintaining cash flow. In order to ensure consistent cash flow, you need to be sure that you are receiving timely payments from your customers. Unfortunately, customers aren't always timely about making account payments. That means you'll need to have a policy in place for collecting on outstanding accounts, and you'll need to actually enforce that policy.
You should follow up with customers with a reminder just before the bill is due. Then, if the bill becomes overdue, you need to reach out to the customer on a regular and frequent basis. Stay in contact and don't let them forget that they owe you money. This also lets them know that you haven't forgotten about them as a customer.
Keep Up With Your Accounts
In addition to ensuring that your customers pay you on time, you also need to be sure that you pay your business debts on time. That means creating a tracking system to ensure that bills are paid when they are due. Remember that your company's history of bill payments will build the foundation of the company's credit rating, so you need to be attentive to those outstanding accounts and pay them in a timely fashion.
If you still have questions about the finances of your new business, you can reach out to a business bookkeeping service for more information.
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