Accounting

No you can’t! No matter what size your new business is or will be, you’ll need to set up a system to keep track of your financial status. This must be done to prove your income to the government for tax purposes at the end of the year, to prove your status to the bank when applying for a business loan, and to show you your own profitability and where you might make improvements to it. As you grow, and perhaps incorporate, it will become the law for you to keep good accounting records and have them regularly audited by certified accountants.

For now you don’t need that, but you might as well start out right.

The Very Least You Can Get Away With

In some situations, you don’t need to get a fancy accounting system. You can create a perfectly adequate system for accounting for your business with just a spreadsheet program, or even columned pad of paper and a pencil!

Now mind you, these situations are very rare. They include such times as:

• You sell your own craftwork part time • You’re just testing a new opportunity • Any other money-making venture that has yet to achieve even minimal potential and has no debt

It’s always a great idea for even these small businesses to have their own checking accounts. In other words, have a bank account set up only for your business. You can put money into it from your personal bank account (capital), but no money ever leaves it that is not related to business expenses. Therefore, you have a pretty good record of your business accounting just from your bank statements!

You may want to organize this information into lists, using your spreadsheet software or paper pad, including, but not limited to:

• Revenue Log – Every time someone pays you for your service or product, record it in this log. Almost every time your business checking account shows money coming in, one or more entries should go in your “Revenue Log.” The only time incoming cash shouldn’t go in your Revenue Log is when you have contributed cash to the business. You did not buy anything.

Your Revenue Log should include columns for: o customer name o date o item # and/or description o quantity purchased o price o subtotal o sales tax collected o total

• Expense Log – Every time you spend money on behalf of your business, so cash goes out of your business checking account, you need to keep track of the type of expense it was. If for nothing else, this is to properly deduct them from income for tax purposes. You’ll create a list that can classify expenses into these, and maybe more, categories: o Inventory – what you pay for the product you sell, or the raw materials to make it o Advertising or marketing expense – website expenses, traditional media ads, related graphics and copy expenses o Training – any attended classes, seminars or conventions related to your industry or running your business; books or eBooks purchased for same, o Sales expenses – display cases, show entry fees, eBay fees, Pay Pal or credit card vendor charges. o Postage – stamps, packaging o Office supplies – paper, pencils, software, other small-cost and/or expendable items. o Office furniture – desk, computer, other large-cost, long-term assets.

You can then provide your outside accountant with this information along with all your monthly checking account statements at tax time and he/she should be able to create appropriate tax returns or financial statements for you or your business.