Reasons a Start-up Should Establish a Plan for Business Accounting
Separation of business and personal operations is essential. This separation should start at the beginning of the process. While the business may focus on a certain product or service, the finances are what determines success. Getting on the right financial footing at the beginning can prevent a lot of problems down the road. These are just a few reasons to incorporate accounting into the business plan.
The biggest reason to establish a plan for Business Accounting is to keep track of expenses just associated with the business. In the first few years, a start-up will typically lose money. This is because huge costs go out to establish the product or service. If the two finances are mixed, it can be very difficult to tell the difference between what the household spent and what was spent on the business. This can make it harder to keep track of the overall investment.
Another reason to have a professional accountant as part of the plan is for a good impression. Investors want an accurate financial picture of how the business operates. This is in addition to the potential for the project. If there are financial pieces missing, the investors will more than likely walk away. Often, it is one of the first items asked for and having the information on hand can be invaluable in netting capital.
Business Accounting also helps to start businesses navigate the tax minefield. Businesses have their own set of taxes which is entirely different than household taxes. There are different rules regarding what can be claimed as well as what items need to be included. Payment rules for social security, workman’s compensation and insurance are vastly different. With rules changing all the time, a majority of the activity at tax season is spent on figuring out Government forms rather than on the business.
Start-ups are at a critical stage. Large investments disappear into the setup of the company. Even though these losses will be offset by future profits, proper accounting practices should begin at the start. This will ensure the business has the best chance at success possible. For more information on accounting for businesses, check out Rawcpa.com.