DIY YOUR ACCOUNTS FOR STARTUPS
It’s difficult for new ventures to hire an accountant to keep records. So, most startups turn to spreadsheet software to list expenses. But there is more to accounting than that.
Any transaction in which your business is a part needs to be recorded. Your financial statements are sources for your financial statements that you must prepare at the end of every fiscal year. It serves as evidence to support your tax calculations, and helps you get a picture of the company’s financial position.
It is generally difficult for new ventures to hire an accountant. So, most startup owners use spreadsheet programs such as Excel to record their expenses. This generally works to maintain a list of the expenses. But accounting is more than that. It is a process of recording all your business transactions in ledgers, manually or by using software.
So, how do you go about keeping records recordkeeping? Let’s look at the basics.
Keep all the receipts
Receipts are evidence of business transactions. It could be purchase bills, expense bills, cheque stubs, bank deposit slips, payment vouchers and so on. You have to maintain a record of all these things.
Maintain a cash book
New businesses mostly use cash. There are many that do not even open a bank account for some period. You can easily lose track of cash. I think we are well aware of this from personal experience. For instance, when you have cash in your wallet and after some time there’s hardly any left, you have no idea where all of it disappeared. Well, the same thing might happen to your business. You can buy a cash book from the stationary and maintain a simple record of your cash-ins and cash-outs. Also, check regularly if the balance in the cash book is what you have physically as well.
Use a small business accounting software
There are many free accounting programs available on the internet for startups that do not have a big transactional volume. These programs generally have an easy interface do not require advanced accounting skills. A quick Google search and you have a list of packages with reviews from other users. If you decide not to do it on a computer, you can maintain a manual ledger.
Keep track of your stock
Just like your cash, chances are that you may lose track of your stock items, especially if they are small and fast-moving. Just like a cash book, you can maintain a stock book to record the stock ins and stock outs. You should check regularly to see if the book stock matches the physical stock. If the accounting package has a built in stock recording function, this will not be necessary but it’s quite unlikely that a free small business package will have this function.
Check bank transactions
You should get statements of your bank accounts regularly and reconcile them with the records that you have maintained. It’s quite likely that you may have missed a few transactions. Make sure that the balance in the bank and on your accounting records is the same.
Tax payments and return filings
Every business has to be getting a PAN (Permanent Account Number), and many of them need to be registered for VAT (Value Added Tax) as well. If you want to do the accounts yourself, some basic knowledge of taxes will be necessary. The responsibility is greater if you are registered with VAT, as you will have to maintain VAT books and make regular VAT filings and payments. Trying to do this yourself without sufficient knowledge could prove to be problematic later on. So, it is advisable to consult an expert if you lack the requisite knowledge in this regard.