Financial and accounting management is the key to the success of any business. Whether a start-up or a fully functioning company, having a proper financial infrastructure is essential to keep your business operations running smoothly.
Small business owners often make the mistake of ignoring the importance of accounting functions and manage the business accounting and bookkeeping themselves. Therefore, they sometimes miss recording crucial data or pile up the accounting tasks until the end, making it difficult to finalize taxation or record business projections in time for closing.
This missed data often leads to debts, increasing interest rates, reduced finance optimization, and eventually increased losses. It is essential to adopt proper bookkeeping and accounting practices from day one so that your company’s financial records remain straight and your business is ready for an audit or expansion.
You don’t have to hire a full-fledged team of accountants or a highly paid chief finance officer right from the start of your business. However, it is vital to dedicate a resource or time from your schedule to the bookkeeping tasks. Here are steps to managing the accounting function of your company.
Start-Up Phase – Setting-Up the Key Accounting Structure: In the start-up phase of your company, it is not necessary to have a complete team of bookkeepers, accountants, and tax managers. However, it is crucial to have at least one person manage these tasks with focus and efficiency.
You can achieve this either by hiring a simple accountant for your business, someone with limited qualification but enough knowledge of bookkeeping so that they can record day to day transactions and maintain a regular record of your business finances, or you can outsource the task to an accounting service or hire a part-time accountant.
If you have an in-house finance manager, be it full-time or part-time, it is also essential to have the appropriate accounting and bookkeeping software to help you conveniently record all the transactions and minimize the risk of human error. Most SMEs utilize QuickBooks for essential accounting functions. However, there are tons of other options available online to help you manage your accounting functions.
Here are some extra tips for setting up you’re accounting in the start-up phase for your business
- Ensure Fraud Protection: Keep periodic checks on all your business transactions, record data regularly, and always tally the receipts and payments to evade any fraud.
- Never Deal in Cash: Set up a bank account and only accept payments through credit cards or wire transfers. Don’t deal in cash, as that can disrupt your taxation and cause leakages in your finances.
- Review All Transactions: Make sure you review all your payments regularly.
- Don’t Take Taxation Easy: you should hire a tax lawyer to prepare your taxes. While accountants might do the job for you, it is best to have an expert on taxes to file your payroll, sales taxes, and quarterly estimated taxes.
Growth State – Get a Part-Time CFO: Once your company starts growing and the revenue starts coming in, you might come in the position to plan your expansion in terms of products or clientele. In either case, this means increased transactions, more businesses, and more workload on your bookkeeper.
If you were outsourcing your bookkeeping tasks, it is time to hire a full-time bookkeeper and a part-time CFO to oversee your financial management. While the bookkeeper continues to do the day-to-day job of recording transactions, the CFO will be responsible for projections and analysis based on revenue figures. This added function will help make well-informed financial decisions and better taxation.
Settled Business – Get a Full-Time CFO with a Finance Team: Once your company has grown and the income has become stable, it is essential to set up a proper finance department overlooked by the CFO. If the number of employees in your company has significantly grown, it is better to have multiple people in the finance department.
Each person in the department should have a hand in the financial management of staff, clients, and operations. The CFO would oversee the department and ensure that the company’s financial health is managed through the work of the staff.
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