Many entrepreneurs are intimidated by bookkeeping when starting a business. Just what do you need to manage your accounting? This post lists some of the important things you’ll need to acquire in order to manage your books and file your tax.
Tax ID number
A tax identification number (TIN) is assigned to every individual or business that has to pay tax. One type of TIN that applies to many businesses is an EIN (Employer Identification Number). If you plan on hiring employees, operate as a corporation or partnership or have a Keogh plan, then you will need to apply for an EIN. You can use a tax ID number filing service to receive your EIN. Businesses that do not need an EIN will still need some form of TIN in order to file tax. Make sure that you know exactly what TIN you need.
You can do your accounting using an Excel spreadsheet, however it’s typically much simpler to use accounting software to handle this task. Such software can automate everything including calculating tax and calculating tax reductions on expenses. There are a few different accounting programs out there to choose from – some of which may be better suited to certain industries. As a small startup, you don’t need to be investing in anything too expensive or complex. It could however be worthwhile choosing an accounting program that has the option to be scaled up if you do ever decide to grow your business. Take your time to read reviews and descriptions of different accounting programs to help you find the best one for you.
Business bank account
It’s much harder to clearly distinguish business transactions and personal transactions when you’re using the same account for personal use and business use. Setting up a separate business bank account can make things a lot easier. It could even be a legal requirement if you’re trading under the name of a limited company or an LLP. When trading as a sole trader, a business bank account is not mandatory, but in many cases it’s still recommended. Almost all banks offer specialist business accounts – it’s worth comparing different bank to see if any have perks. Business savings accounts can also be worth setting up to help you hold company savings and collect interest, while business credit cards can be useful to have for when you need to borrow money.
Many small businesses do not need to hire an accountant. If you can easily keep track of your earnings and outgoing costs, there’s no reason not to do your bookkeeping yourself to save money. However, if you’ve got lots of different sources of income and lots of different expenses to keep track of, including different payment options and different accounts, you may find it more convenient to hire an accountant – it could save you a lot of time and minimize errors. Hospitality businesses, retail businesses and healthcare services almost always need accountants due to the sheer amount of transactions. When dealing with complex transactions like payments in foreign currencies, it can also be worth hiring an accountant.