Learn the 10 key accounting steps small businesses need on day one and why partnering with the right accountant makes all the difference
Opening day is an exciting milestone for any small business owner, but it’s essential to have a solid financial foundation in place to ensure long-term success. Partnering with an experienced accounting professional can make all the difference, providing you with insights, guidance, and support. Here are the ten key financial actions every small business owner should take on day one, and how the right accounting partner can help at each step.
1. Open a Separate Business Bank Account
Keeping personal and business finances separate is essential for maintaining clarity and accountability. Learn more about why separating accounts matters and other small business accounting tips for financial success.
- Simplify Tax Preparation: A dedicated business account makes it easy to track expenses and reduces the risk of costly errors.
- Build Business Credit: An accounting partner can advise on best practices for using your business account to build credit, which will be helpful if you need funding in the future.
2. Set Up an Accounting System
Having a structured accounting system from day one will simplify your finances and give you valuable insights into your business’s performance. If you’re not sure where to start, check out our guide on the differences between bookkeeping and accounting to understand what each entails and why they’re both crucial.
- Choose the Right Software: Your accountant can recommend accounting software that fits your industry, budget, and goals.
- Customize Your Chart of Accounts: Setting up a chart of accounts can be confusing, but an accountant will customize it to reflect your specific business needs, ensuring clear, useful financial records.
- Automate Processes: An accountant can help you integrate automation for invoicing, bank feeds, and expenses, saving you time and minimizing errors.
3. Implement a Record-Keeping System
Accurate record-keeping is essential from day one, and an accounting partner can help you establish an efficient system.
- Organize Receipts and Transactions: An accountant will advise on best practices for organizing and storing receipts, ensuring that you have the documentation needed for tax time and audits.
- Track Deductions: Working with an accountant helps you understand which expenses are deductible, maximizing your savings and reducing your tax burden.
4. Create a Budget & Financial Projections
Setting a realistic budget and financial goals from the start will help you manage resources wisely and avoid financial stress.
- Forecast Revenue and Expenses: An accountant can work with you to create a financial forecast that aligns with your business plan and market conditions.
- Adjust Your Budget: Your accountant can help you review and adjust your budget regularly, offering insights into where you can reduce costs or invest for growth.
5. Develop a Cash Flow Management Strategy
Cash flow management is key to keeping your business financially healthy. For more on managing your finances effectively, take a look at the SBA’s comprehensive guide.
- Monitor Accounts Receivable: Accountants can set up systems to track outstanding invoices and recommend strategies to improve collections.
- Create a Cash Reserve: Your accountant can help you establish a savings plan to ensure you have funds set aside for lean periods or unexpected expenses.
- Understand Payment Cycles: With an accountant’s help, you can manage payables and receivables strategically, ensuring you’re not caught off guard by cash shortages.
6. Set Up Payroll & Employee Taxes
Payroll and tax compliance are complex and time-consuming, but an accountant can streamline this process, ensuring you’re compliant from the start.
- Choose a Payroll Provider: Accountants often partner with trusted payroll providers, making it easier for you to manage payroll, withholdings, and filings.
- Ensure Tax Compliance: Payroll taxes are strictly regulated, and your accountant will ensure that calculations and filings are done accurately and on time.
- Stay Updated on Regulations: Payroll laws change frequently, and an accounting partner keeps you up to date on any changes that could impact your business.
7. Register for Required Taxes & Permits
Every new business must meet regulatory requirements, including licenses and tax registrations. Follow the SBA’s 10-step guide to starting a business for a checklist on required permits and registrations.
Sales Tax Registration: If you’re selling taxable goods or services, your accountant can help you register for a sales tax permit and understand your obligations.
- Apply for an EIN: An accountant can assist in applying for your Employer Identification Number (EIN), a crucial step for tax filings and payroll.
- Understand Industry-Specific Permits: Accountants often have experience in specific industries and can guide you on obtaining necessary licenses or permits for your line of business.
8. Establish Inventory Accounting Practices
For businesses managing inventory, accurate tracking and valuation are essential to profitability. An accountant can advise on effective inventory management and valuation methods.
- Choose an Inventory Valuation Method: Accountants can help you choose between methods like FIFO and LIFO, based on your business model and tax goals.
- Monitor Inventory Levels: An accounting partner can help you set up an inventory tracking system and ensure accurate record-keeping for financial statements and tax purposes.
- Calculate Cost of Goods Sold (COGS): Accountants are invaluable for calculating and recording COGS, which affects gross profit and informs pricing decisions.
9. Plan for Taxes with a Proactive Approach
Taxes are one of the biggest concerns for small business owners, but with an accounting partner, you can plan proactively and avoid surprises.
- Estimate Quarterly Tax Payments: An accountant can calculate estimated tax payments, helping you avoid underpayment penalties.
- Set Aside Reserves: Accountants often advise on best practices for setting aside cash specifically for taxes, ensuring you’re prepared when payments are due.
- Maximize Deductions: Accountants are skilled at identifying deductions and credits that apply to your business, reducing your overall tax liability.
10. Build a Habit of Regular Financial Reporting
Regular financial reporting gives you insight into your business’s performance and helps you make data-driven decisions. With an accounting partner, you can ensure your reports are accurate, timely, and actionable.
- Monthly Financial Statements: An accountant can prepare income statements, balance sheets, and cash flow statements each month, giving you a clear view of your business’s financial health.
- Financial Analysis: Accountants can interpret these reports and provide insights into areas for improvement, such as reducing costs or increasing profitability.
- Strategic Financial Planning: Many accounting firms offer advisory services, helping you with long-term planning and growth strategies based on your financial performance.
Choosing the Right Accounting Partner Matters
From navigating tax compliance to providing real-time financial insights, an experienced accounting partner is invaluable for small businesses. The right accountant does more than just balance the books—they become a trusted advisor, helping you make smart financial decisions and avoid costly mistakes.
Partnering with a knowledgeable accounting firm brings multiple benefits, including:
- Customized Solutions: Every business is unique, and the right accountant tailors their approach to fit your specific needs, from inventory management to payroll and beyond.
- Expert Compliance Support: Tax laws and accounting regulations are complex and always changing. An accountant keeps you informed and compliant, so you avoid penalties.
- Growth and Profitability Insights: Accountants understand the financial challenges that small businesses face, and they can offer strategies to improve cash flow, increase profits, and set achievable growth goals.
- Long-Term Financial Planning: Whether you’re planning for expansion, hiring, or simply seeking financial stability, an accounting partner provides the financial guidance needed to achieve your goals.
J.R. Martin & Associates offers customized solutions for every stage of your business, helping you with everything from establishing your inventory management and payroll to tax planning and financial reporting. Our team is dedicated to supporting small businesses, ensuring compliance, optimizing cash flow, and guiding you toward your financial goals.
By partnering with J.R. Martin & Associates, you gain a reliable team that understands your vision and provides the expertise needed to build a sustainable, thriving business. Let us be the foundation of your financial success from day one.
