When you start a new business, establishing solid accounting practices is essential to your success. However, many startups face accounting challenges that make it more difficult for them to get off on the right foot. Here are five of the most significant accounting challenges your startup may face, along with tips for dealing with them.
1. Keeping track of financial information.
Startup businesses are overwhelmed with financial information related to their revolving debts, payroll, operating expenses, accounts receivable, and more. Keeping track of this information allows the business to optimize cash flow, pay taxes on time, evaluate the success of the business, attract new investors, and accomplish other important tasks. To deal with this accounting challenge, small businesses need to invest in software to help them keep track of important financial information. Alternatively, startups can also delegate these responsibilities to a third-party accounting service.
2. Creating an Effective Budget
Not all startups and small businesses have funding. Even if they do, it is exceedingly important to create a business budget and adhere to it. Unexpected expenses could lead to financial instability, causing the business to fail. One of how this challenge can be countered is to create a budget that is developed keeping in mind business goals, availability of money, cost of resources, infrastructure needs, and operations. Incorporating scenario planning into the business can help optimize available resources without resulting in overspending.
A budget also aids in the streamlining of operations through enforcement of vital investments in the business; for example in core security areas, regulatory compliance needs, and insurance coverage payments
3. Ensuring Effective Tax Returns
It is no secret that tax obligations must be met in full. However, it is equally important for a fledgling startup or a fast-growing small business to understand tax deductions and tax credits they can take advantage of. This helps save financial resources while ensuring the business stays on top of its tax obligations, as well.
It can get difficult for a small business, even one run by an accounting professional, to stay on top of tax time details. For this reason, a business should hire professionals.
- Raising Finances
Acquiring finances to fund a business is probably the most important thing about this. It is also another very difficult hurdle for small business owners to overcome. This task can be accomplished by investment planning. But, since there are so many startups, competing for investors can be quite a challenge.
The most sure-fire way to make it is to build a solid business plan and have clear and concise financial records. These we can later show to potential investors and can be used as a gold bar to get their attention.
Payroll is unavoidable no matter if we are an international company or a startup. Every company has employees. Making sure that payroll is accurate is key to avoiding unexpected expenses, tax complications, and many other issues. It can be a challenge though. Again, it is another thing that can be handled in-house or outsourced to another specialized company.
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