Why Start-Ups Need Bookkeeping
Every large corporation once began as a startup with an original idea, a viable business model, and pure grit and determination. The crux of every startup is finding a way to acquire customers and generate revenue in exciting, new ways. In order to succeed though, beneath all that excitement and enthusiasm you must maintain accurate, detailed financial records, aka--bookkeeping.
Money is ultimately what will keep a startup going, so managing your money wisely will determine the viability of your company in the long run. Before your startup can get off the ground, though, you must have both accounting and bookkeeping systems in place.
First Steps for Startups
First, choose a business entity (sole proprietorship, S or C corporation, partnership, or LLC). Before you can set up bookkeeping and accounting records, you have to designate the structure of your business because that will determine how you are taxed, the size of your business, how you pay yourself, liabilities, and other important factors. Next, open a bank account, separate from your personal account, specifically for your startup. Then, purchase accounting software or outsource to establish an accounting and bookkeeping system.
Accounting is essential to every business, big or small. It functions as a monitor of the company’s financial standing, and provides accurate indicators about what is working and what needs to be improved like managing the budget, generating financial reports, and keeping in compliance with the IRS. Bookkeeping is different from accounting. It tracks day-to-day transactions and cash flow, then records it in ledgers. This includes recording invoices, payments, deb