Getting Your Startup on Track

Business ownership is a constant flood of satisfying milestones coupled with expanding to-do lists. With your launch, you’ll need to get on top of the accounting tasks that come along with owning a store. This list of 10 small business accounting steps will give you the confidence to know you’ve covered your bases, and are ready to move on to the next item on your business to-do list!

1. Open a Bank Account

After you’ve legally registered your business, you’ll need somewhere to stash your business income. Having a separate bank account keeps records distinct and will make life easier come tax time. Note that LLCs, partnerships, and corporations are legally required to have a separate bank account for business. Sole proprietors don’t legally need a separate account, but it’s definitely recommended.

Start by opening up a business checking account, and then any savings accounts that will help you organize funds and plan for taxes. For instance, set up a savings account and squirrel away a percentage of each payment as your self-employed tax withholding. Next you’ll want to consider a business credit card to start building business credit. Corporations and LLCs are required to use a separate credit card to avoid commingling personal and business assets.

Before you talk to a bank about opening an account, do your homework. Shop around for business accounts and compare fee structures. Most business checking accounts have fees that are higher than personal banking, so pay close attention to what you’ll owe.

In order to open a business bank account, you’re required to have a business name, and usually be registered with your state or province. Check with the individual bank for what documents to bring to the appointment.

2. Track Your Expenses

The foundation of solid business record keeping is learning to track your expenses effectively. It’s a crucial step that allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and support what you report on your tax return.

Right from the beginning, you should establish a system for organizing receipts and other important records. This process can be simple and old school (bring on the FiloFax), or you can use a service like ShoeBoxed.

There are five types of receipts that you should pay extra attention to:

• Meals and Entertainment
• Out of Town Business Travel
• Vehicle Related Expenses
• Receipts for Gifts
• Home Office Receipts

Starting your business at home is a great way to keep overhead low, plus you’ll qualify for some unique tax breaks. You’re able to deduct the portion of your home that’s used for business, as well as your internet connection, cell phone, and transportation to and from work sites and for business errands. Any expense that’s used partly for personal life and partly for business must reflect the mixed use.

For instance, if you have one cell phone, you can deduct the percentage you use the device for business. Gas mileage costs are 100% deductible, just be sure to hold on to all records and keep a log of your business miles (where you’re going and the purpose of the trip).

3. Develop a Bookkeeping System

Before we jump into establishing a bookkeeping system, it’s helpful to understand exactly what bookkeeping is, and how it differs from accounting. Bookkeeping is the day-to-day process of recording transactions, categorizing them, and reconciling bank statements.

Accounting is a high level process that looks at business progress and makes sense of the data compiled by the bookkeeper by building financial statements.

As a new business owner, you’ll need to determine which bookkeeping method to use:

You can choose to go the DIY route and use software like Quickbooks or Wave. Alternatively, you could use a simple Excel spreadsheet.

When your business is big enough you can opt to hire an in-house bookkeeper and/or accountant.

With so many options out there, you’re sure to find a bookkeeping solution that will suit your needs.

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