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Business Accounting 101: 5 Ways to Formalize Your Accounting System

Business Accounting 101: 5 Ways to Formalize Your Accounting System

So you have a great idea and you’re now in the process of starting your own business. You’ve also already forecasted revenues and jotted down how much you need to earn to breakeven from your capitalization. What’s next?

  1. Open a Bank Account. As a start-up, you may think it is okay to use your own bank account for the business’ transactions. However, by using your own account you may be more tempted to use the money for other matters instead of making it earn more. This will also help you keep track of revenues and spending.

  2. Prepare Financial Statements. Familiarize yourself with a Balance Sheet, Income Statement, and Cashflow Statement, as these are key to getting data about your business. Balance Sheet will tell you your assets (what you own), liabilities (how much you owe), and equity (how much capital you put up). Income Statement will tell you how much revenue you earn, how much your expenses are, and how much profit you are making. Cashflow Statement will tell you where your money is going and how much cash you have.

  3. Track Financial Ratios. Financial ratios are simply data taken from your financial statements that can be used for comparative analysis versus other businesses in your industry. For instance, if you run a coffee shop and you have revenues of $10,000 with a profit of $2,000 a month, then you can calculate Profit Margin (how much income you earn per sale) by dividing Profit ($2,000) by Revenue ($10,000). Your profit margin is equal to 20%, which you can compare with other coffee shops in your state. If you are doing less than the industry average, maybe there is something you need to adjust in your operations or your pricing scheme.

  4. Use Accounting Software. We live in new times now and it is more efficient to use software than manually calculate information with a spreadsheet. Before getting one, make sure it has good reviews and is user-friendly.

  5. Get Accounting Services. If you want to focus your energies on growing your business and looking into the marketing side of matters, it is best to outsource accounting services. Unified Accounting & TAX is a professional tax and accounting firm in San Francisco Bay Area, California and we can serve you anywhere in the globe!

Whatever business you have, our tax and accounting solutions in Fremont, California has got you covered! We would love to know more about your business and give you more time to work on other parts of your business. Call us at 510-299-2131 or visit our website at www.unifiedat.com. We’ll talk to you soon!

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