As a new business owner, you may find yourself lying awake at night, pondering your many questions about bookkeeping and accounting. I know I did! I’m still no expert, so I’m pleased to welcome Esther as my guest today, and I hope the information she has to share will help you make the right decisions for you and your organizing business.
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When you sit down and daydream about all the benefits of owning your own business the chances are you don’t dream about all the extra accounting and paperwork you will have to deal with. But for many small business owners the reality of the first few years will be exactly that – a long trawl through the accounts and all the finer details of the self-employed and business tax regulations. That’s because most new small business owners won’t have the funds available to pay for a decent accountant and will need to do everything themselves. If that sounds like you and your small business then this article will offer some solutions to accountancy problems that most new businesses face:
(1) Should I Do It Myself?
Only you can answer this question but unless your business has a great deal of start-up funds available or unless you are absolutely hopeless in working with figures, chances are you will need to wait a year or two before getting an accountant. That said, if you are confident you will be making good profits in your first year and that you will be able to afford an accountant (and bear in mind that the cost of you doing it yourself might be more expensive than hiring someone else) then getting an accountant will certainly make life easier.
(2) I Want to Do It Myself – Where Do I Start?
Once you have decided to go it alone and handle all the accounting yourself the first thing you should do is some research. In addition to all the government guides you can get your hands on it is worth looking in the shops for one of the many idiot’s guides to getting your taxes done correctly. Most of these will have enough detail in them to get you started in your first year. Additionally, pick up one of the many guides to starting a small business as these will have a number of chapters covering everything you need to know about taxes and tax returns.
(3) Which Is Better for Me – Bookkeeping or Software?
Once you have made the decision to handle your own accounts you then need to decide how you are going to do it. The first way is the old fashioned way, using the old and traditional bookkeeping techniques that have been used for centuries. This is the better option if you are good with figures and want to feel close to all the facts and figures of your business. As long as you know your way around a debit and credit column this is a nice way to study your business whilst keeping track of the sums and it has the advantage of teaching you good discipline in the way you control the business. However it is very time consuming in comparison with the second option. And that second option is to use accounting software on your computer. This has the advantage of cutting out human error in the calculations and of being a great deal quicker. There will be some added cost when you buy the software, but that is minimal and there are even some free packages out there now if things are really tight. However, if you want to go for ease of use and something with plenty of free online training, just opt for a package like Excel, which gives you a computer version of the traditional double entry bookkeeping. Excel is easy to learn and very basic but also has infinite room to grow with you and your business with all kinds of formulae built in to make all the necessary calculations for you so that all you need do is enter the data. Should you want to spend a bit more money and completely automate the whole process there are a number of more in-depth software packages designed for small businesses (Sage, Quicken or Intuit are the leading examples). Such programs have a longer learning curve but once you know how to use them they will save you a whole load of time in automating all your financial jobs.
(4) I Want an Accountant – How Do I Choose a Good One?
Obviously the first and most important step is to gather a list of potential accountants and ensure that they have the correct credentials. In the US this is done via the American Institute of Certified Public accountants. They maintain an up to date directory of qualified and accredited accountancy firms and accountants. In the UK there are three separate bodies to choose from; the Association of Chartered Certified Accountants, the Institute of Financial Accountants and the Institute of Chartered Accountants. However, just because they are qualified doesn’t mean they are any good at their job. The next step is to find out by word of mouth which ones have a good reputation and which ones to avoid. Talk to other people in business as well as to friends and family. Search online and see if anyone has reviewed their company. And then when you have narrowed it down, go along and have a preliminary interview with them and see what you think of them. Do you have a good feeling about them? Could you trust them with your affairs? How much do they charge?
Ultimately the choice between going it alone and hiring an accountant will depend on the amount your business is bringing in. If you can afford it then an accountant will pay for themselves. If not, get some software and concentrate on building your business.
Esther is a business blogger based in Chicago. She writes about all areas affecting small and large businesses from entrepreneurship to tax relief and invoicing and covers a broad range of topics from housing development funds to oilfield funding.