Most people hear the term entrepreneur and immediately envision a startup company in the tech industry or similar field The truth is that there are millions of entrepreneurs, many of whom are operating businesses in the gig industry. Whether an individual is a first-time business owner or a serial entrepreneur, there are some essential accounting tips they need to know.
Create a budget. Cash flow is the life blood for an entrepreneur. Cash flow issues are the primary cause of business failure. It’s essential to keep careful watch over expenses. Use bookkeeping software to make the process easier.
Cash or Accrual
A cash-based accounting model records expenses and revenue when the money is paid. It’s good for small businesses, those that offer professional services, and businesses that don’t maintain an inventory. An accrual model records revenue when it’s earned instead of actually received. It’s a better solution for larger companies, those that are more complex in nature, and businesses that keep inventory.
Write-Offs and Deductions
Maintaining receipts ensures entrepreneurs receive all the write-offs and deductions to which they’re entitled on their taxes. That can include vendors, transportation, and monthly bills associated with operating the business. Be sure to categorize expenses.
Don’t rely too heavily on credit cards It’s easy to use credit as a means of supporting the business, but entrepreneurs can easily find themselves so far in debt they’re unable to even make minimum monthly payments on their card.
Predict the Future
Keep an eye on financial trends. A realistic financial forecast is essential to plan for future sales, expenses and income.
Never combine personal and business accounts. Its easier to monitor business health and prevents entrepreneurs from being responsible for business-related debts.
It’s the Law
Entrepreneurs need to know and understand the law regarding the type of business they have. Anyone in business for themselves will have tax responsibilities and expenses that hourly or salaried employees don’t. Hiring an accountant is a smart strategy. Individuals can benefit from an accountant’s experience, knowledge, and the professional can help keep a new business on track for success.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!