Your first year in business – the beginning of your journey
Deciding to go out on your own and start up your own business is one of the most exhilarating things you can do, and to succeed you need more than luck.
You need the right attitude, a good dose of common sense and a thorough understanding of your finances.
As a bookkeeper, I love helping new businesses get off the ground – and start life on the right foot.
Before you even start your business, there are a few things you should to make sure you get off to a flying start.
The least of which is to make sure you have the right accounting and bookkeeping practices in place, reducing the risk of running into financial trouble before your business can take flight.
So, how do you do that?
1. Consult an accountant to make sure you’re setting everything up right
I know money is tight at the start of a new venture, but even if you can’t afford to put on a bookkeeper right away – make sure you consult your accountant before you set up your business structure.
They can not only recommend a good bookkeeper for later down the track, but they can also make sure you don’t end up paying for things you shouldn’t.
Ask your bookkeeper or accountant how you should prepare your accounts, record things, and find out what you can and can’t claim (this one gets people all the time!).
If you start out with best practice, not only does it help your business run smoothly, but it will also save you time and money during tax periods.
Try to avoid being influenced by family and friends (old mate down the pub) who haven’t been in business before. Ask for professional advice, so you get an educated answer.
2. Choose your accounting software before you start trading
Don’t leave the selection of accounting software to the last minute.
It’s important to have your accounting systems in place, trialed and tested to make sure all is functioning before you start trading.
New business owners tend to think about the added expense of accounting software, instead of the necessity to have good systems in place.
It’s always best to do your research or consult with a bookkeeper who understands your needs, your industry and your business before selecting which software to use.
3. Set realistic budgets
Budgeting should probably be my number one tip because so many businesses – even established ones – don’t do this vital step, and it can get you in hot water.
To set a budget, you need to ask yourself critical questions like:
- What are the costs of running this business, excluding lease and staffing?
- What are my tax and reporting requirements?
- What do I want to earn from this business annually?
- At the end of year one, what do I project I will have earned?
Figure out how long you can sustain the costs of your day to day living expenses and business start up costs before revenue starts rolling in.
Be honest with your budgeting, and once you have a budget set out – stick to it!
4. Make sure your personal accounts are covered
Many new business owners can get a bit confused about what they can and can’t claim on their business cards or accounts.
In addition to realistic business budgets, you really need to make sure your personal finances are covered while you set yourself up.
Make sure you know how much you need to live on, and account for non-work-related spending in your budgets as well.
I’ve seen businesses come under extreme financial burden as the business owner draws money from business accounts to pay their day to day living expenses, leaving themselves in a pickle when it comes time to pay business tax or invoices.
So, make sure you keep your business and personal spending separate.
Taking the time to set yourself up correctly means less stress during your first year of trading.
PART TWO: Your first year – staying afloat
PART THREE: Laying the foundations for future success