So you’ve got an idea, you’ve got a product, or you're ready to start selling your service. Now what? One of the most important things you will ever need to do in any business venture is keep records!. What did you purchase, when did you purchase it, who did you purchase it from, how much did it cost, did you pay tax on it, what did you sell, how much did you sell it for, did you collect any tax? Those are just a few, to begin with!

Assuming you’ve got your resale certificates from the state you operate in and a Federal Tax ID, you can begin to do business, but here are some important things to remember when setting up your accounting system.

1. Leverage it out, eventually!

One of the most important, but equally time consuming tasks you will have to leverage in your business is keeping all of the financial records straight. But you want to sell! You want to create! You want to grow! While at first, you won’t likely have the option of spending money on a bookkeeper or full time accountant, your goal should always be to leverage this task out of your hands and into the hands of a professional as soon as possible. Calculating taxes, filing returns, keeping up to date on all the laws are all great things, but can be extremely time consuming. The best way to go about this is to learn what you need to at the beginning, get a solid foundation for accounting concepts and practices, and then leverage it when you can. There are a ton of free resources on the web, and in future articles here on Leave the Harbor we will delve into them more as well. For now, just know that if you SPEND money or RECEIVE money, you need to keep track of it.

2. But in the meantime, remember a few things.

There are a few important concepts to remember when you first start off keeping the books yourself. Here are some of the top ones to remember.

The IRS recommends keeping all your sales & financial records for at least 7 years!
A double entry, journal-style accounting program is great and very flexible, but all the accounts typically have to be built from the ground up. Online programs like QuickBooks or other accounting software are amazing at taking much of the guesswork out, and they connect directly to your bank accounts and charge cards.
If in doubt, don’t be afraid to ask. Pick up the phone and call your state Department of Revenue Services. Believe it or not, they do want to help you, and many basic questions can be answered completely free of charge.
Have a safe space to keep your receipts, even if you have digital copies, it’s never a bad idea to save the paper ones as well.
At the end of the day, to keep it simple, just remember - know what you spent, know what you received.
Keep track of whether a sale you made was within your state or not - you WILL owe sales tax on it, and how much will depend on whether it was a product, or a service - and if a service, what kind of service in some cases. Categorize your receipts!
Speaking of receipts, if you ONLY have a paper copy, a receipt scanner can be a great asset. Check out some great ones here - both apps and physical products. https://blog.hubspot.com/sales/receipt-scanner

3. It’s all about the Benjamin’s baby.

At the end of the day, if your company is selling one unit a month or 12 units a second, it doesn’t matter one bit if you aren’t PROFITABLE. Even if you are just starting off with an excel spreadsheet - make yourself a budget. Determine what your monthly expenses might be in all kinds of different categories, track your actual expenses against those estimates, and make sure at the end of the day you are actually turning a profit. A high volume, low margin business may appear to be selling a ton of product, but after all your expenses you might be losing money! Here are some expense categories to consider when drafting a budget :

Office Supplies
Utilities
Lease or Rent
Banking Fees
Interest Charges
Product Purchases
Travel & Entertainment
Payroll
Professional Services (accountants, consultants, etc.)
Depreciation Expense
Equipment
Postage
Shipping Supplies
and more!!!

Knowing what you are spending, what category it is in, and how much it compares to your sales income, is critical from the start to knowing if you have a viable long term business - don’t skimp in this area!

Until next time!
BEN