How To Manage Your Business Accounts Of Your Small Business
Business ownership is a complete package to heart worming accomplishments packed with a never-ending to-do list. This checklist of how to manage your business accounts will help you to assure that you’ve covered all of your bases and are ready to move on to the next item on your business to-do list.
Open a bank account
After you’ve properly registered your company, you’ll need a place to keep your profits. Having a separate bank account keeps records separate and makes life easier when it comes to filing taxes. It should be noted that LLCs, partnerships, and corporations are obliged by law to establish a separate business bank account. A separate account is not required by law for sole owners, although it is strongly advised.
Begin by creating a company checking account, followed by any savings accounts that will assist you in organizing funds and planning for taxes. Set up a savings account, for example, and set aside a portion of each payment as your self-employed tax withholding. Next, you should consider getting a company credit card to start developing business credit. To avoid commingling personal and company assets, corporations and limited liability companies must use a separate credit card.
Do your research before approaching a bank about opening an account. Compare charge structures and shop around for business accounts. Most corporate checking accounts charge more fees than personal banking, so pay close attention to how much you’ll owe.
You must have a business name and be registered with your state or province in order to obtain a business bank account. Check with your bank to see what papers you need to bring to the appointment.
A budget will assist you in effectively managing your company’s cash. Include fixed and variable costs, as well as earnings, in your budget. It will provide you with a snapshot of your cash flow. You may make mistakes at first, such as failing to include all monthly spending, but with experience, you will be able to adapt your budget more correctly. When you need to cut your business costs in order to increase income, you might consult your budget.
Track your expenses
Learning to track your spending properly is the cornerstone of good company record keeping. It’s an important stage since it lets you track your company’s progress, create financial statements, keep track of deductible spending, prepare tax returns, and back up what you declare on your tax return.
You should create a system for managing receipts and other vital data from the start. This procedure may be as basic and old-school as using a FiloFax, or as sophisticated as using a service like ShoeBoxed.
You should pay special attention to the following sorts of receipts:
Meals and entertainment: Holding a business meeting at a café or restaurant is a terrific choice; however, make sure you thoroughly document it: record who attended and the purpose of the dinner or trip on the backside of the receipt.
Out-of-town business travel: The IRS and CRA are on the lookout for persons who claim personal activities as business costs. Fortunately, your receipts give a paper record of your business activity while you’re abroad.
Vehicle-related costs: Keep track of where, when, and why you utilized the car for business purposes, and then apply the proportion of usage to vehicle-related costs.
Receipts for gifts: For presents such as concert tickets, it matters if the gift giver attends the event alongside the receiver. If they do, the cost will be classified as entertainment rather than a gift. Make a note of these facts on the receipt.
Receipts for home office: Similarly to car expenditures, you must determine what proportion of your house is utilized for business and apply that amount to home-related expenses.
Starting a business from home allows you to keep your overhead low while still qualifying for certain unique tax incentives. You can deduct the amount of your house utilized for business, as well as your internet connection, mobile phone, and transportation to and from workplaces and errands.
Any cost that is utilized for both personal and commercial purposes must be recorded. For example, if you own one mobile phone, you may subtract the proportion of time you use it for business. Gas mileage is completely deductible; simply preserve all receipts and keep track of your business miles (where you’re going and why you’re there).
Create a bookkeeping system
Although bookkeeping is a part of accounting, it is different from that. So, before we get started on creating a bookkeeping system, it’s important to understand what bookkeeping is and how it varies from accounting. The day-to-day practise of documenting transactions, classifying them, and reconciling bank statements is known as bookkeeping.
Accounting is an upper-level of procedure that examines corporate activity and makes sense of the data acquired by the bookkeeper via the creation of financial statements. As a new business owner, you must decide which bookkeeping approach to employ:
- You can try a DIY kind of way where you can use mobile apps or computer software, or you can create a simple spreadsheet. Alternatively, you can use a full-fledged ERP software that is specifically designed to manage your business accounts.
- You can hire an outsourced or part-time bookkeeper who is either local or cloud-based.
- When your company is large enough, you can recruit an in-house bookkeeper and/or accountant.
- With so many alternatives available, you’re bound to discover an accounting solution that meets your requirements.
Set up Payroll System
If you’re just starting out, you’ll most likely be a one-man show. Perhaps you’ll hire part-time staff to assist you or a freelancer to create your logo. It would be best if you immediately determined whether that person is an employee or an independent contractor.
For employees, you’ll need to establish a payment or payroll schedule and verify that you’re withholding the right taxes; there are several services that may assist you with this. Keep track of how much you’re paying each independent contractor.
Tracking all of your company expenses will assist you in improving your business and reducing wasteful or excessive spending. You should be aware of where your money is going and where it is coming in. To manage your business accounts, you can keep a book, use an expense tracking software, or you can use a small business accounting software. When you recruit new staff, keep track of their expenses to avoid fraud.
Set Up Sales Tax Processes
Setting up the sales tax process depends on your business nature. If you have brick and mortar store where customers come to your store and buy products, then you can add GST to the bill according to your state.
Suppose you have to business where the customers are from another city, state, or even country. Like e-commerce, then the tax system gets changed. You can refer to the cleartax’s article that will thoroughly inform you about the GST system in India.
Determine Your Tax Obligations
The tax requirements of a firm vary based on its legal form. If you work for yourself (sole proprietorship, LLC, partnership), you will report business revenue on your personal tax return. Corporations, on the other hand, are distinct tax entities that are taxed separately from their owners. As an employee, your earnings from the corporation are taxed.
Calculate Gross Margins
Improving your business’s gross margin is the first step toward increasing your entire income. To calculate gross margin, you must first determine the expenses of producing your goods. To better grasp this, let’s define the Cost of Goods Sold (COGS) and gross margin.
Cost of Goods Sold (COGS): These are the direct costs involved in manufacturing a company’s items for sale. This covers both direct labor and material expenditures.
Gross margin: This figure shows the total sales income retained after deducting all direct costs incurred by the company in producing the product or service.
Here’s how to figure out your gross margin:
Gross Margin (%) = (Revenue – COGS) / Revenue
What ultimately decides your capacity to keep the doors open is the gap between how much you sell a product for and how much the firm actually takes home at the end of the day.
Periodically re-evaluate your methods
When you initially start, you may want to handle your books with a basic spreadsheet, but as the business develops, you’ll want to explore Small business accounting software like VedaERP. As your business expands, it’s important to constantly examine how much time you’re spending on your books and how much that time is costing you.
The correct bookkeeping solution allows you to devote more time to the business because bookkeeping is no longer on your plate, potentially saving the company money. Win-win!
VedaERP – The Best Accounting Software
VedaERP is industry-leading ERP software developed by SAN Softwares, and it can handle all your accounting needs, such as GST reports, inventory, purchase management and more. It can drastically simplify your business operations by helping you in most of the crucial business tasks mentioned above. All these things combined make it one of the best ERP software. Below we have added some top advantages of our VedaERP, which is solely made for you:
- Lead Management
- Purchase Management
- Project Management
- lead Scheduling
- GST Report
- Contract Management
- Clients Rate
- API Integration
- Whatsapp Integration
- Single Click Search
- Sales Team Login
- Sales Management
- Telephony Integration