While every entrepreneur is struggling to build their business, there are many things that they need to do – including taking care of their accounting. Most startups often find themselves spending time finding what are the accounting basics that they need to track rather than putting that time into building their business.
While we are at it, we are going to list 10 accounting basics that every startup should track to understand the financial status of their business.
Accounting costs for startups
It is a must for every startup to keep a record of your financial expenses since it will help you when you will be preparing the budget for both expected and unexpected expenses. By keeping the records straight, you can make sure that you have all the information handy to make informed decisions.
Invoices (Accounting basics startups must track)
Another accounting basic that a startup needs to take care of is creating an invoice. No good company can survive without having a properly drafted invoice for your clients and customers. There are many different invoicing software available in the market that will make things easier for you like Paci Finance.
As a startup, it is important that you create and establish good credit with your vendors from the very scratch. That ensures you pay all your bills in a timely manner. It is important that you examine all your bills & ensure they are accurate before you clear them.
There are many tools that can be used to track the accounts payable. We highly recommend you automate the process and make sure that all your payables are paid in a timely manner.
Credit card statements
Reconciling your credit card statements is as important as any other accounting task you are handling for your startup. One thing that you need to remember is that – credit fraud is the real thing and can be hidden in the small charges for you to ignore them. This is why it is essential to track all your credit card transactions periodically.
If you are just at the initial phase of your startup, there is a possibility that you don’t have any tax returns yet. However, when you are at that stage, it is essential that your file all the returns and keep all the records at least from the last three years.
Proof of payment
Most startups tend to make the mistake of not keeping any payment proof. There are many situations in which you would need this proof. For instance, imagine you ordered your supplies and your suppliers says that they will send over the order once they receive the payment. The problem is you already mailed them a cheque three weeks ago and have no way of proving it to them. This is why it is important that you build a strong proof of payment.
Keeping a record of monthly and quarterly financial statements can help you keep track of your business’s financial status. The best thing is that it is not as complicated as it seems if you are using the right accounting software or accounting company. Most of the latest accounting software tends to have the option of easily creating financial statements.
We highly recommend you maintain monthly financial statements to review the performance of your business on the financial front.
If you are at a stage where you have no employees, this is not something that you need to worry about. However, if you have even one employee, it is important to track their payroll. By payroll, we mean everything from managing employee personnel records to retaining employee time records. Not just this, but you will also have to manage all related payroll forms.
If you are a startup owner, it is important that you track all your startup expenses. This way you will be able to track the money coming in and out of your books and give you a number that you need to run your business efficiently and effectively.
Retained earnings record any business profits that were reinvested in the business and were not paid to the shareholders. They are cumulative, implying they appear like a running total of money retained since the business started. This record is particularly useful for investors and lenders monitoring the company’s performance over time.
In the end, we would like to point out that it is always better to know what all metrics to track and record when it comes to accounting. As we mentioned in the beginning – startups have a lot to handle and making mistakes in accounting is one of the most common mistakes that occurs while building a business.
This is why we highly recommend you outsource accounting services to professionals like Paci Finance in the UAE. There are many benefits of outsourcing accounting services in the UAE which you must check before deciding for yourself. All you have to do is contact us and we will assist you with everything accounting without you having to worry about the accounting operations ever again.