ACCOUNTING FOR YOUR NEW BUSINESS

You have to start “accounting” for your proposed business almost immediately. Can you afford the start-up costs? Do you have enough money to pay all the personal and business expenses until you start making a profit? How can you tell when you are making a profit? Can you provide a potential lender an up-to-date Financial Statement within a few minutes? How do you know what to file when the various tax authorities expect you to?

There is a way to start the necessary recordkeeping to meet all the needs mentioned and the time to start is right away! You will be constantly asking yourself financial questions and if you seek advice from folks like SCORE, or start talking to your banker, the first thing they ask for is financial information showing where you are now and projections for your proposed business.

Where do you start? I’ve been asked to write this piece and my answer differs a bit from what you normally hear from others, especially if you are starting out as small business with no, or just a few, employees. People call me a serial entrepreneur. I have started/operated several small businesses and have counseled several hundred small business owners. I understand what basic software is needed to effectively and efficiently manage the finances of a small business. 

First a basic....if you don’t have your personal finances in order DO NOT proceed with any business plans until you do. Having tried a number of accounting programs I found one that provides an easy learning curve for the basics as well as can grow with you as your financial picture becomes more complex. 

Too many times, in my opinion, you are directed by financial professionals to use QuickBooks. It is an excellent software program but tends to overwhelm new users particularly when you are just starting to talk and think in terms of Assets and Liabilities.

So here is the advice of this user. Go out now and buy a hard copy of Quicken Premier or Quicken Home and Business (the latter preferred if you plan on being a Contractor and need to keep track of individual jobs). Both can be used as your one stop accounting base from which you can produce Financial Statements, Budgets, as well as keep track of all your expenses and assets. Getting the hard copy allows you to install it on another computer if you have to replace the old one.

Quicken and your bank can talk to each other. Pay all your bills online through your bank and they will guarantee delivery by the date you specify. Saves stamps and your time. You can do all of your banking on line with transactions automatically downloaded from your bank accounts, credit cards, and investment accounts. Why is this important? First, your Financial Statement is automatically updated without you doing a thing. Second, you see every action that takes place in your accounts. If you see a credit card charge you don’t recognize, you can contact the credit card company immediately rather than waiting until a monthly statement arrives. 

Finally, it is important to know that all of your data can be transferred to another Quicken product so none of the early efforts will have to be repeated and none of your historical data is lost.

SOURCE: Jack Black, SCORE Counselor July 2013
The material in this publication is based on work supported by the U.S. Small Business Administration under cooperative agreement SBAHG-04-S-0001. Any opinions, findings and conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the U.S. Small Business Administration. The information contained in this publication is believed to be accurate and authoritative but is not intended to be relied on as legal, accounting, tax or other professional advice. You should consult with a qualified professional adviser to discuss issues unique to your business.