He_is_piling_up_his_Thrift_Stamps-Are_you-_Buy_Thrift_Stamps_LCCN00652894.tifThe road to successful entrepreneurship can be a long and rocky one. Therefore when your business is in the start-up phase it is important to ensure financial efficiency is a prime consideration in any decision you make.

The five steps outlined below will make sure your business is built on firm foundations.

1. Choice of Legal Entity

This decision will have repercussions on your tax return, on the records you need to keep and on the amount of personal financial risk you are exposed to. For any person considering working as a contractor you will need to weigh up the benefits of a limited company versus an umbrella company.

For other start-ups there will be the choice between the sole trader route, various types of partnership or a limited company. If you choose the latter you will need to register with Companies House (ed. note: US businesses should probably register elsewhere 😉 ) and file an annual return. However, it will give you more protection with regards to your personal assets.

2. Insurance Protection

When you are a new business it is easy to forget about making sure you protect yourself against unexpected events. Legal claims brought against you, damage or loss to property and insufficient cover for your employees can literally wipe out your business if you don’t have ample insurance cover in place. Public liability, employers’ liability, property insurance and professional indemnity are the minimum cover you should seek. As your company grows you may also want to consider key person insurance and additional life assurance and private medical insurance for you and any staff.

Once these five key areas have been addressed you can move forward in confidence. You will know you have established your start-up in the most financially efficient way to take you forward into future business success.

3. Protect Your Data

You will amass a large amount of data within your business in a relatively short time. This can be both electronic data and hard copies. It can also relate both to your own business and to those of clients, including sensitive personal and financial information.

The security of your electronic data ties in with the point above about keeping your systems running smoothly. As well as troubleshooting problems as they arise you also need to think long term and to put the following processes in place: install and regularly update virus protection software to guard against malware and the malicious loss of sensitive data; protect systems and applications with complex passwords and change them frequently; and finally back-up all data on a daily basis and keep these backups secure and off-site in line with best disaster recovery practice.

4. Taxation and Accounting Choices

Excellent record keeping within your business will ensure you are ready to make annual returns and remain as tax efficient as possible. If accountancy is not one of your areas of expertise at least familiarize yourself with the basics. Even if you outsource bookkeeping and payroll ultimately it is your responsibility, and not your accountants, to make sure records and annual returns are accurate.

However, expert advice can help to ensure you claim all the business expenses you are entitled to. This can make a substantial difference to whether you are in profit, and by how much, at the end of your first year in business.

5. Keep Your Systems Running

In today’s technology driven workplace, most businesses cannot function without their computers, laptops and mobile phones. Ensuring your network, or even your own personal computer, has relatively little downtime is essential to the financial viability of your business. If you run into small computer issues you can often solve them yourself by searching for computer tips to help you get back up and running. If the issue is more serious it can be more time and money efficient to seek professional help as soon as possible.

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A lot of new businesses start out with no help from accountants. This is one mistake which is common to most businesses which fold almost immediately. The accountant is a requirement if the company hopes to succeed in business. The following are some reasons to hire an accountant as soon as a business has started or even earlier if possible.
 
1. Business Plan and setting up the business systems. A business plan is the framework for all the systems and work flow of the business. It includes the type of service or products being sold, the sourcing, and the avenues of sales. It also includes the work flow and the document flow. All of these systems lead to their accounting as part of the business. The transaction document flow is an overlay on top of the business plan. The ability to map or create this overlay makes the accountant would be the best person to create the business systems. If the business plan involves outsourcing supplies, then the document flow would include quotations from the potential suppliers; orders, sales vouchers, delivery receipts, invoices and request for payment from the suppliers; it would also include the provisional receipt, official receipts, and checks for the payment of the goods. It would also include the company's  sales invoices, delivery receipts, request for payment, and cash receipts for goods sold. Along the way, there would be bank and import documents, as well as inventory reports. All of these paper trails are proof of a business's operation and their collation and recording is part of the responsibility of the accountant.
 
2. Business & Tax Assessments, including tax computations and filings. An accountant advises on tax computations and in tax preparation. He would know the proper forms, and computations, including allowable deductions. He would also know how to include expenses and categorize them in order to best serve the business. He runs the cycle of monthly filings, recording and bookkeeping of daily transactions, and the control of the financial procedures. This is one task which the business owner has to let go and trust the document handling to an expert.
 
3. Internal Auditing of books. The audit of books should be done by a separate accountant. This could be an external consultant to separate the audit from the bookkeeping and filings. In most instances, these are separate activities done by two different persons. The audit ensures that the books were done correctly, and that the procedures were done correctly. Without an audit, there is a danger that a business would be losing money without knowing it. A big danger for any business is loss through skimming, or embezzlement. An audit helps lessen the risks for this to happen.
 
4. Analyze data for profit. The accounting process results in reports detailing the financial health of the company. This is the job of the accountant. When done properly and in a timely manner, the books would show if the company is making money or losing it. A careful in-depth analysis can also show how the business is losing money, or where the company is making money. For instance, a fuel trucking company can have a single old truck. The accounting data can show if it is more profitable to have a newer truck compared to current operations with an old truck. The costs of operating the truck can show the additional costs due to maintenance, and operating expenses. If there were two trucks of different make and model, the expenses for each can be compared, and the owners would know whether to dispose of one truck and buy another one, or to keep using the existing equipment because there is significant difference in costs. An accountant can study the books, analyze the costs, and earnings, and show which course of action is better. With the use of actual data, the management can have a better decision making mechanism.
 
5. Business Forecasting. From the financial reports, an accountant can help in business forecasting. This is different from sales forecasting made by marketing or sales personnel. Business forecasting using the accounting books and reports are purely from the internal data sources. It shows whether the company needs to move differently or if the company needs to tighten some expenses. A lot of businessmen have a grasp of running the business, but an accountant can show if the business decisions are going to be costly errors or if these can be avoided. A simple figure like a return on investment can be used to trace how to do business better. Some financial decisions are based on financial reports, including manufacturing capacity, order levels, inventory levels, and others. In some instances, business expansion can be better decided with the use of the accounting reports. There are some decisions which only an accountant can help with. Would it be better to increase the capital expenditures in order to increase the gross revenue, or would it be better to maintain the current physical plant and push for better profitability? Some people would rather grow for growth's sake, while an accountant would usually keep an eye on the percentage return on investment.
 
The bottom line is that an accountant is an important part of any business. Running a business without an accountant is one sure way of losing the business. He should be there before the business gets started, during the organizational stage, business planning, operation, bookkeeping, tax filing, audit, and in deciding a future expansion. Having an accountant responsible for the above tasks leaves the manager, or owner more time to manage the business. For a single person operation, the documentation, bookkeeping, accounting and audit alone can take up half of the owner's time. This is time that the owner cannot afford to lose. Hiring an accountant can be the most profitable thing that a small business owner can do.
 
 
Author Bio:
 
Pafohio is a Professional Accounting & Consulting (CPA) company. It provides complete outsourced accounting, tax services & payroll in Mason area. They help you in growing your business with efficiency & support you with proper guidance so that you can save your time and money.
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