Step 4

Accounting

When it comes to your company finances, tasks can be put into three categories:

  • Bookkeeping – Recording financial transactions
  • Accounting – Interpreting, classifying, analyzing, and reporting financial data
  • Tax prep – The preparation and filing of your taxes

 

Once you have formed your company, you should:

  • Find an accountant who will do your taxes. When you first talk to them, get their advice on how to setup your finances after company formation. You can use a service like 1-800Accountant or find a local accountant online or by a recommendation.
  • Open a company checking account, savings account, and a credit card at a major bank
  • Use your company accounts and card for all business transactions moving forward
  • Change the payment info on all your existing accounts like GoDaddy and hosting to your company card
  • Have your accountant take business purchases made prior to business formation into account when filing taxes your first year

 

Tools for managing your finances

The tool you use to manage your finances is usually determined by the size of your company.

 

For very small companies spreadsheets may suffice, or Quickbooks online.

 

Larger startups usually go with Quickbooks online for bookkeeping, accounting, payroll, and more. You can link Quickbooks with your bank accounts so your financial transactions automatically get imported into Quickbooks every time you open it. Then you can organize and classify them more easily.

 

Approaches to managing finances

The amount of time and care you put into recording and classifying your finances can vary based on your situation and priorities.

 

Some people who run a one or two person company don’t bother with bookkeeping or accounting. At tax time, they do the taxes themselves with a tax software like TurboTax, or send all their bank statements for the past year to their accountant for him to sort through and file their taxes. At this size, full financial literacy isn’t a requirement.

 

Most companies with 5 or more people use Quickbooks Online for bookkeeping, accounting, and payroll. Then at the end of the year they export their yearly financial statements to their accountant for him to file their taxes.

 

A note about taxes

It is recommended to file each year, even if you only have loses, because the IRS will carry those loses forward to subsequent years and it will give you tax benefits when you do start to make money.

Click done once you have setup your business operations!