Starting a new business? Take note of these 8 Accounting functions

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Starting a new business? Take note of these 8 Accounting functions

Femi Adeoya

October 20, 2019

Starting a new business? Take note of these 8 Accounting functions

It’s very important to roll with a good accounting systems set up when starting your new business. You don’t want to get into the business of making money without accounting for the money by establishing basic accounting system. At the beginning stage, you need to establish a structure that will support your company finances, and help define your financial strategy, as you grow.

Please note that it’s not advisable to attempt to carry out your accounting activities yourself because you do not want to hire an account officer or a financial consultant. What you will lose at the end will be more and it will be penny wise, pounds foolish.

Many growing businesses have tried to do their own accounting themselves. It’s not quite easy and will result to double work once a consultant is now called in, resulting in a greater cost for the business than if they had originally hired a Financial Consultant.

You may want to consider the following activities as you begin your new business:

1. Set up a simple accounting system.

In the beginning, you just need a basic accrual-based accounting system that will cost you very little money. A simple one user sage 50 peachtree accounting solution can be of help here. This would basically help you track your income and expenses, help you eradicate or minimise fraud and error prone transactions, help you make sense of your business activities and interprete the figures behind them. You can call us on 0803 239 3958 for help here.

2. Set up your Chart of Accounts.

I’s not difficult to create a Chart of account for your new business especially if you are a Small and medium scale business (SMEs). This basically contain the ledger account of the different elements of income, expenditure, capital, assets and liabilities. Read more Charts of accounts here.

3. Open a corporate bank account

A business or corporate banking account either for your enterprise or your limited liability company is very advisable. This will enable you corporate income and expenses from personal income and expenses. All cash and transfers for the business MUST first be paid into your bank account and on no consition must cash be taken away from the sales before been deposited. This will help you to have adequate turnover analysis for your business and help you to account for income and expenditure better.

Your bank account will be one of those Charts of account that will be maintained in your accounting software.

4. Keep all records of receipts and invoices.

Ensure you open a file each to keep your sales invoices (goods or services sold), purchase invoices (goods or services purchased), receipts, (goods or services paid for). Each invoice must have a date, invoice number, name of customer or vendor as the case may be and details of the transaction including the units price, units and amount.

5. Do not forget your tax obligations.

You should be very mindful of making remitance to the appropriate inland revenue centres for your VAT which is Value Added Tax, PAYE, Pay As You Earn, Income tax for limited liability company, Consumption tax if you are an hospitality company or restaurant or event centre depending on your state in Nigeria and witholding tax. There are different penalties for defaulting companies which you should not fall victim of. Your financial consultant should be able to advise you on the best way to approach this taxes so as not to be subject to heavy liabilities.

6. Set up a system to collect payments.

Setting up a formalized accounts payable system early helps you to maximize cash flow and create essential financial reports. Work with a professional to identify the best tracking system for your needs. Once the system is set up, you’ll need to enter every expense and establish your invoice AP schedule. Place vendors on net 30 payment terms and work hard to ensure that you always pay your bills on-time and up-front. This will help you to build a reputation for financial stability.

7. Create a payment collection/ Credit control system:

You should have a credit policy that allows a given number of days for your customers to owe you money for goods or services rendered. You should also discuss with your vendors and suppliers to give you some space to keep their goods or enjoy their services and pay later.. this is like an interest free short term loan. Generally your credit policy should be such that have the minimum customer payment period and maximum vendor/supplier payment peiod. This will help to sustain your cash flow.

Call 0803 239 3958 for free financial consulting advice for your businesses.
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