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Starting a Small Business: What to Expect

So as you start a new business you are likely feeling a number of emotions...excitement, nervousness, courage, and maybe even a bit of self-doubt. This is normal for any new business owner, but educating yourself (as you are doing now) will help you know what to expect as you face these challenges head-on.
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We are all learning how to pivot and make something out of nothing with Covid-19. Many of us are starting new businesses due to the loss of a job or finding we have the perfect opportunity to help others while we all make sense of the world.

So today we are going to dive into what to expect when starting a small business…from an accounting perspective.

 

You Will Likely Need Accounting Software Sooner Than You Think

Depending on the type of business you are starting, in those early days, you may believe you can cut costs by tracking your expenses in excel. While this may be true for a month or two with some businesses, it is best to adapt a software sooner rather than later.

Why? Because oftentimes the first year or so is tough financially. So tracking every expense will be beneficial come tax season and aid you in making decisions about pricing your products.

Adapting an accounting software is going to be especially important as soon as you begin generating sales. From that point forward your numbers are going to be able to start predicting the financial health of your business.

 

QuickBooks May Not Be The Best Software For You

If you look up accounting software for small businesses, there is no doubt you will come across QuickBooks. It is the original accounting software for small businesses and is a well-established company that is useful to both bookkeepers and small business owners.

Having said that, it is not a one size fits all software. There are other bookkeeping programs out there that may be able to provide quality services at a cheaper price or include features that would better suit your business.

For example, if you are really trying to save a dollar some have found Xero to be less expensive depending on their needs. While if you are a non-profit, Aplos will be better suited to your needs.

 

Accounting is More Than Just Reconciling

Accountants do more than just reconcile your books. They actually help you build your business. As you build, you are likely going to have questions that an accountant can help you answer. For example:

  • How should I price this product/service?

  • Can I pay myself more?

  • How should I prepare for taxes?

  • Is this deductible?

  • Why am I losing money?

An accountant is your partner and they want the best for you and your business. Sometimes having an outsourced accountant can actually be better because while they want to see you succeed since they are not inside the business they can help you make unbiased decisions.

 

You May Also Be Interested In:

What You Should Do With Your Finances, 

Day 1 of Your Business

 

Don’t Forget to Pay The Business – And Yourself

Pay your business first! This means before you take out money for payroll, expenses, or x, y, and z, set aside your profit. An appropriate profit margin is going to change from one business to the next, but generally speaking, 20% is where you will want to be.

Paying your business first is about creating a savings or rainy day fund that provides stability for the business while ensuring healthy financial growth.

The second step is to pay yourself. Plenty of business owners get trapped in this habit, especially early on. They may be conservative and only want to pay themselves very little or be frozen over the fear of business finances that they pay themselves nothing at all! 

An accountant can help you understand how much you should pay yourself and explain that you should pay yourself – especially early on.

 

You Will Make Mistakes

We will say it again – you will make mistakes. A business owner who spends every dollar correctly, prices every product perfectly, and never goofs off during business hours, started too late. If you knew that much in the beginning then you should already be hugely successful.

You will likely price a product too low and then maybe too high. Only to find the sweet spot a year or two in once you have a couple of clients. You will underpay yourself and overpay a contractor. You will forget to pay an invoice or leave useless software on autopay – only to discover it months later. You will make mistakes and that is ok.

The important thing is to put preventative measures in place to minimize those mistakes and be vigilant about understanding your business’s finances.

 

Having worked with small businesses for years, we understand it may be hard to outsource your accounting in those early days. However, many find an accountant actually helps them save money and make better decisions with one by their side.

If you are looking for an accountant to help you build your business, consider scheduling a call with us today.

Disclaimer:
This publication is designed to provide information on federal tax and accounting laws and/or regulations. It is presented with the understanding that the author is not rendering legal or accounting services.

This text is not intended to address every situation that arises or provide specific, strategic tax and/or accounting planning advice. This text should not be used solely to answer tax and/or accounting questions and you should consult additional sources of information, as needed, to determine the solution to tax and/or accounting questions.

This text has been prepared with due diligence. However, the possibility of mechanical or human error does exist and the author accepts no responsibility or liability regarding this material and its use. This text is not intended or written by the practitioner to be used and cannot be used by a taxpayer or tax return preparer, for the purpose of avoiding penalties that may be imposed.

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