Five Accounting Tips for Young Entrepreneurs
For those unfamiliar with the profession, the words “accounting” and “taxes” resonate much the same as a teacher running her nails down the chalkboard does. If not, at the very least, it probably (and rightly so) makes you a little nervous. For young people trying to start their own business, the feeling is probably even further magnified. Even if you have the next million dollar idea, poor bookkeeping, tax compliance or general disregard for core accounting functions can be disastrous for even the most promising young startup. To enable you to steer clear of the wrath of the IRS, here are five accounting tips for young entrepreneurs to always keep in mind as you embark on your startup journey:
- Make it a Habit from the Start. Much like the same way that you brush your teeth each morning (hopefully), check your email, or review inventory, make the act of checking your books a part of your routine. Set reminders on your phone or computer telling you to review your books. By making this a habit, you can save yourself ample time and stress that you would be subject to by waiting until the last second. If you’re not the type who can trust yourself to stay on top of this task, outsource the task to a professional. There are affordable options for nearly every budget, and you’ll save yourself some headache/stress in the long run.
- Learn the Accounting Language. One of the most difficult obstacles for those who do not make accounting their profession is understanding the wide array of terminology used. T-Accounts? Contra Assets? Perpetual vs. Periodic? Although we would all love to ignore what we don’t know and tell ourselves it’s no big deal, the reality is that this is quite possibly the worst thing you can do. By taking the time to learn the basics, you’d be surprised by how much you can pick up in such a short period of time. There are plenty of resources on the internet to assist you, such as American Institute of CPAs, IRS.gov, SBA.gov or Pocket CPAs. You’ll want to avoid soliciting advice from places like Facebook, Quora, Reddit or various other online platforms. While this advice is sometimes correct, you cannot rely on the “internet expert” for such important decisions.
- Find the right Software. There are a plethora of different accounting software platforms available for use, so take the time to find one that fits your needs. Most accounting platforms are migrating to the cloud, which enables ease of use and accessibility. The most popular of these options is QuickBooks Online. For others who operate their business on the go, Xero and FreshBooks are great mobile software options. For the bootstrappers in the crowd, Wave offers a truly free, cloud based platform that is both intuitive and easy to use. Above all,what matters most is that you pick a software that is accommodating to the way you run your business.
- Network, Find a Mentor and Seek Out Free Advice. When accounting issues arise, you may be able to figure it out yourself if you have a sound understanding of the basics. But the reality is that you have a very important business to run—and your time is best spent elsewhere. Some resources you have available to you are local entrepreneur-focused groups, which are full of experienced entrepreneurs like yourself who are more than happy to help. For example, in Chicago, some examples include The Entrepreneurs’ Organization of Chicago, the Business Network Chicago Entrepreneur Group, Built in Chicago and the Chicago Entrepreneur Meetup. The local community has plenty of co-working groups that often have talks and classes geared specifically for entrepreneurs. You may also want to look to old coworkers or bosses, or even fellow entrepreneurs to see who they use when they’re in a jam. Should you happen to receive an alarming piece of mail from the IRS, they can at least be a voice of comfort and reason. At the very least, give them a call and seek out free advice. Most (but not all) accountants and mentors are willing to provide a free consultation in the hopes that you’ll become a customer.
- Hire When Necessary. There are certain situations that every startup and small business faces where bootstrapping and trying to do everything yourself simply isn’t sustainable. Furthermore, trying to handle complex tax filings and compliance matters that you may not be qualified for could ultimately lead to more headaches and fees down the road if they were done incorrectly. If you’re questioning whether or not you need a professional to handle it, you probably do. Take some time and ask around to those in your networks for a good referral, and shop online for an accountant that fits in your budget. Beware of outsourcing to those with the lowest rates, as that’s often (but not always) indicative of the quality of service you’ll receive.
In the end, accounting really is not too daunting if it is managed properly. Take some time to actually learn the basics, and you will see that it is not as frightening as you may have once thought.