Have you found the right business idea, built your business plan and completed all the paperwork for starting a new business? Congratulations, you are about to launch your entrepreneurial project! Before launching, you will have to think about your business accounting. We know, this is probably not the most exciting part of your business launch, but planning and organizing your accounting is essential. We suggest you follow these 8 steps that will help you to get started on the right track.
1. Make a chart of accounts
The chart of accounts is an orderly collection system of financial information. It is the basic tool needed to prepare the financial statements that you will have to produce at the end of the fiscal year. The chart of accounts makes it possible to classify the accounting operations according to a standard of presentation. We always distinguish seven major classes (accounts) used for accounting purposes, regardless of the type of chart of accounts.
Once you have created your chart of accounts, you can then import it into the Kiwili software to classify and organize the different account movements.
Want to know more and have chart of accounts examples? Read our article Free Chart of Accounts, 5 models to discover.
2. Open a business bank account
In Canada, opening a professional account is only mandatory for business corporations. However, even if sole proprietors have no legislative constraint, we suggest you to open one. Having a small business bank account allows you to differentiate between your private and professional transactions and thus simplify the management of your cash flow. This will also allow you to facilitate any tax audit operations.
3. Learn about sales taxes
Depending on where you opened your business, different procedures apply to sales taxes. The country of your customers also plays a role in taxation. So do your research on the rules in place to properly charge sales taxes to your customers. If in doubt, ask your accountant, who will be able to guide you.
4. Determine how you will get paid
As a freelancer, solopreneur, or small business, online payment is the easiest, fastest and safest way to get paid. With Kiwili’s accounting management software, it’s easy to receive online payments through PayPal and Stripe. All you need to do is create a PayPal or Stripe account and then configure the integration in Kiwili.
Once you found your first customer, you’ll just have to send an invoice, and get paid online effortlessly!
5. Manage your business expenses
As a general rule, you can deduct any reasonable expenses you incurred or will incur to earn business income. So keep your receipts and enter your business expenses in a management software like Kiwili. Using a software to manage your business expenses will be helpful in tracking your cash outflows and tax amounts paid.
- Learn more about business expenses and deductions in Canada: Visit the Government of Canada webpage on this topic.
6. Manage your cash flow
Cash flow is the inflow and outflow of money into your business. In fact it is about the power to finance his daily expenses thanks to the sums of money available. Cash flow is therefore a very important point in running a business. It is an indicator of its viability and sustainability. Cash flow problems are indeed one of the main causes of business bankruptcies.
Use Kiwili’s treasury features to help you manage your business budget and cash flow.
7. Do your bookkeeping
A business must keep the records of all the daily accounting operations carried out in the fiscal year. Bookkeeping plays a critical role in any business. Not only does bookkeeping keep record properly organized in order to accomplish annual taxes, but it can also be helpful when it comes to making business decisions.
You can decide to do the bookkeeping yourself, or outsource this task to an accountant.
Note that it is mandatory to keep certain administrative and accounting documents. The type of document to keep and the retention period depends on the region in which your company was incorporated.
It is important to always keep in mind that financial management and accounting is a big issue in a business. If you follow this list, you will at least have your accounting in order from the beginning of your entrepreneurial project. You will start on the right foot and ready will already be aligned to success!