If you’re an entrepreneur launching a new business, chances are pretty good the side of your brain that does not manage your bookkeeping functions with far more flair! So close your eyes, make a wish for financial happiness, and allow me to be your Bookkeeping Fairy Godmother.
Voila! Here’s a Primer for the best possible beginning.
1. Payroll is not a “Gimme.” Click your heels three times and repeat after me: Payroll is not something to be taken lightly and can put me out of business before I even know what’s going on! As the thunder sounds, if you’re not into “bookkeeping” and you don’t know what a 941 is, my advice is OUTSOURCE IT - turn it over to someone who does. There are several affordable options and you’ll thank your lucky stars when you do.
Here’s why. Corporations are required to make payment to employees through a formal payroll. Get it set up with State Unemployment and EFTPS (Electronic Federal Tax Payment Service) for automatic payments. You’ll find the SUTA Guide here. (SUTA stands for State Unemployment Tax Act.)
Bottom line? if you’re not up-to-speed on New Hiring Reporting, E-verify, 401K or IRA Withdrawals, Wage Garnishments, (the list goes on…) then NEVER attempt to do your own payroll with some silly online spreadsheet! If you do, it’s a guarantee you’ll be paying tax penalties for years.
2. Abracadabra! Accounts Receivable. Quick receipt of payments will give you better control over your cash flow and a clearer sense of your company’s finances. Create payment policies for your clients now by answering these questions: How will I collect my AR’s? How long do my clients have to pay? What methods of payment are allowed? For best results, we recommend using Merchant Services to speed up the process. QuickBooks Merchant Services works in the background and integrates seamlessly, reducing the time it takes to get your hard earned cash.
3. Be GAAP Happy. According to the all-powerful IRS, your company’s accounting practices must follow GAAP rules and compliance –that is, Generally Accepted Accounting Principles. Brush up on best practices now so you can take your financials to the next level. How? Take a bookkeeping class, not some dude’s advice about required receipts! This is especially important if you’re seeking investors or want to sell your business at some point. To satisfy investors or buyers, you’ll need GAAP compliant financial records. Most accounting software today is GAAP compliant, but I’m sad to say that excel spreadsheet your working in is not. So SNAP! Here are some
4. Think in 9’s. Rushing through tax papers in January is not a fun way to start the New Year, so keep up with the 1099 process throughout the year. The simplest approach is to collect W-9s (required for contractors who you pay more than $600 in a calendar year) before you issue contractor payments, rather than figuring out who you need them from at the end of the year and frantically chasing them down when they’re preoccupied with festivities and resolutions. The W-9 protects business owners from anyone claiming they were supposed to be on your payroll, or covered under workers comp.
5. Pay Estimate Taxes. Contact your tax professional for ways to minimize your taxes in the current year, and don’t forget you may be required to pay quarterly taxes. Preparing tax estimates now will help prevent expensive surprises and penalties next year. Wondering who has to pay? How do you know what to pay? When do you pay? You’ll find the answers here -You’re welcome!
6. Grrr… Be a Watch Dog. Now, open your eyes! When it comes to Fraud, what are your internal controls? Instead of whimpering when it happens, look for weak spots where the potential for fraud or errors runs high. Implementing stringent rules and regulations now can help reduce problems later. Be aware of credit card charges and PayPal charges - both easy ways for employees to steal. Create cash controls. Do you sign employee’s timesheets, or just “trust” them? Trust me on this one!
7. Look before you leap. The magic happens by creating a budget or sales forecast. This can be done in QuickBooks or using a simple spreadsheet. This way, when you reflect on your past year, you’ll be able to see quite clearly where you’ve succeeded, the benchmarks you’ve met, and what direction your company is headed.
Lynn Talbott, MBA, is President and Founder of HR Business Solutions, a Professional Bookkeeping and Small Business Management company in Chattanooga, TN, where she’s helped more than 50 start-ups and small businesses achieve real financial success. She’s a QuickBooks expert with a signature turnkey approach that provides businesses with a solid foundation of bookkeeping, support, and tax management.
Previously a Corporate Trainer and HR Manager for a fortune 500 Company in Seattle, Washington, Lynn holds a BS in Business with a concentration in HR Management from UNC Chapel Hill, and an MBA from Bryan College. She is a Certified QuickBooks ProAdvisor and teaches Bookkeeping classes at the Small Business Development Center in downtown Chattanooga.