Accounting & Bookkeeping
An accounting system is the backbone of all your financial activities, where you record your income and expenses and create reports (and sometimes budgets) to keep track of your success. Your bookkeeper and accountant also will use this system so you can have accurate data in one place.
There are many accounting systems online. We recommend ones that are best for small businesses and startups, where you won’t need as many of the functions as a mid-sized or large corporation might. Each of them typically offers a free 30 day trial. It’s best to discuss your needs with your accountant first, before you decide on an application.
Accounting Systems to Consider
Accounting vs. Bookkeeping
Many startups aren’t sure about the difference between accounting and bookkeeping. Think of it this way:
- Bookkeeping records your transactions and accounts and decides how to categorize expenses and sales to fit your business and taxation rules.
- Accounting takes information from bookkeeping and creates summary reports (called “financials”) and tax reports to submit at year-end.
Bookkeeping entails keeping track of and recording all your sales and expenses in an accounting system and reconciling them with your bank account(s). You will need to decide if you will do your own bookkeeping or hire someone.
If you choose to do it yourself:
- Develop a system for organizing your paperwork and receipts
- Set aside some time every month to update your books
- Learn about taxes. These will be the most confusing and significant part of your financial management activities. Make sure you understand when you charge and pay taxes and keep that money aside for payment at year-end. One of the biggest mistakes startups make is not putting aside enough money for taxes.
- Learn about how to set up your financial accounts (these are different than bank accounts)
- Reconcile with your bank account so you don’t miss any “real” transactions
An accountant will prepare your financials and tax reports annually so you can stay current as an “active” business in the government registry. The government wants to make sure you pay your taxes and an accountant makes sure you are optimizing your business for the taxes that you have to pay – no more and no less than is required. Any investor or lender will want to see your financials so it is important to make sure your accountant stays up to date with your year-end processes. Your accountant will thank you for keeping your books up to date and you will pay less in professional fees if he can do his job easily and efficiently with good information.
Look for an accountant who understands your industry and has experience with startups. This will ensure that the decisions on taxation structure and the way your financials are presented are a good fit for the type of income you generate, the types of expenses you incur, and for any taxation rules specific to entertainment and artists.
Talk to a number of accountants before you sign up with one. If you have a great relationship with your accountant, it will make your life much easier.
Managing expenses requires discipline. You will need to make decisions about your business rules and processes.
No business can escape taxes. Ensure that you have everything in place to manage and prepare for your tax payments.