Many factors contribute to the success of a business. That said, one of the simplest is also one of the most important: strong accounting.
If you’re not keeping track of how much money you’re spending and how much you’re earning, you can’t stay afloat very long.
For example, maybe you’re coworking in Cincinnati or another major city. Renting space in these shared offices should be part of your monthly budget, and it’s important you weigh the pros and cons of a space like this. As someone working hard to get a business off the ground, you have many financial factors to consider. That’s why all solopreneurs should take the following basic accounting steps when starting their businesses . . .
1. Research Structure Options
Between LLCs, LLPs, Sole Proprietorships, and several more, entrepreneurs have many business structure options to consider. From a financial perspective, some options are better than others. Take the time to research various business structures to determine which will save you the most money during tax season.
2. Create a Business Bank Account
Mixing your personal finances with your business finances doesn’t simply make it difficult to track earnings and expenses; it can also put you at risk of being audited. Be sure to create a separate business bank account sooner rather than later.
3. Proactively Track Expenses
You already know you need to spend money to make money. You also know you need to keep track of exactly how much money you spend.
Don’t procrastinate on this task. If you don’t record an expense right away, there’s a chance you’ll forget about it later on. Being proactive is key to having an accurate picture of your finances.
4. Invoice Immediately
It’s important to thoroughly discuss invoicing procedures with clients before starting any work. This prevents disputes later on.
Additionally, it lets you know exactly when you can invoice for work that’s been completed. Do so as soon as possible to avoid running out of money. If you wait to send an invoice, you may not have funds for essential resources.
That said, it’s possible clients won’t pay on time. Set up automatic late payment reminder emails to ensure you don’t waste time chasing clients when this happens. Of course, if they still don’t pay, you may need to threaten legal action.
(Tip: Reduce late payments by offering discounts for early payments.)
5. Pay Your Suppliers
Obviously, a client who doesn’t pay you isn’t a client you’ll have a positive relationship with. However, there’s another side to that coin. You also need to pay your suppliers on time in order to maintain positive relationships with them. If you ever have a rush job, you want to know you can count on your suppliers to help you out. That may not happen if you wait to pay them.
As your business grows, you can offload accounting tasks to other employees. That said, you may not reach that stage of growth if you don’t handle these essential tasks first. Address them now to reap the rewards later.
About the author: Rae Steinbach is a graduate of Tufts University with a combined International Relations and Chinese degree. After spending time living and working abroad in China, she returned to NYC to pursue her career and continue curating quality content. Rae is passionate about travel, food, and writing, of course. Her twitter handle is @araesininthesun