As a startup, businesses are probably juggling many different things at once – from developing a product or service to hiring their first employees. But one thing a business should not neglect is recordkeeping and accounting.
Even if a business is still in its early stages, it’s important to start tracking expenses and income to make more informed decisions down the road. The best financial and management accounting books can help you up-skill your accounting knowledge, but here’s a quick and easily-digestible summary of what you’d learn from even the best books on the topic.
So what startup accounting documents and records should a business be keeping track of? Here are six key ones.
A business plan is a document that every startup business should put significant time and effort into creating. This is because a well-developed strategy can help guide a business’s growth, setting it on a solid foundation that has thought out all of the different aspects of its operations.
Such critical elements include marketing, financial planning, customer service, and product development. In addition, having a clear outline of its overall goals and objectives can help keep a business focused on what’s essential so that it doesn’t get distracted by day-to-day operations. Developing a solid business plan is crucial for any growing startup, as it provides valuable guidance for both short-term and long-term success.
Cash flow statement
When you think about accounting for startups, a cash flow statement is one of the most important documents a startup can keep. It shows how much money is coming in and going out, which lets a business know whether or not the business is sustainable. If there’s more money going out than coming in, that’s a red flag that a business needs to make some changes.
A cash flow statement can also help track expenses to see where money is going. Accounting is especially important for startups because every penny counts. By keeping a close eye on cash flow, a business can ensure it stays afloat and grows over time.
Income statements are essential for understanding the financial health of a business. They provide valuable insight into vital metrics like revenue, expenses, and profits, allowing entrepreneurs to make critical decisions based on solid data. For startups, in particular, income statements are crucial documents to track and monitor over time. If you have an angel investor, venture capital trust or private equity firm providing finance to your business, these parties will want to review financial reports on a periodic basis to monitor their investment.
They provide a wealth of information about where the business is currently at and where it is going, allowing its founders to plan strategically for the future. Whether looking at historical financials or projecting a company’s growth into the future, an income statement is an essential document that no startup should be without.
When starting a business, it’s essential to have a clear understanding of a company’s financial health. Therefore, a business should pay close attention to one critical document, its business’s balance sheet. A balance sheet provides an in-depth look at a company’s assets, liabilities, and equity at a given point in time.
By analyzing the information it contains, a business can get a better sense of how well the business is doing financially, where there may be room for improvement, and what it needs to do to achieve long-term growth. Given its high level of importance, a business must keep an up-to-date and accurate balance sheet for its startup.
With this information in hand, a business can make informed decisions about everything from spending to hiring. Ultimately, having a thorough knowledge of a startup’s finances can help to ensure that the business runs smoothly and reaches its full potential.
Your tax returns might be prepared long after your primary financial statements, but this does nothing to lessen their importance. The UK tax authority HMRC will calculate the amount liable for corporation tax (CT) via your annual CT return. If you have paid monthly or quarterly installments, your final return will provide the ultimate cumulative tax position that you will catch up to in your final installment.
Obtaining tax advice in North East UK may allow you to take full advantage of the many complexities in the corporation tax rules, many of which are designed to encourage investment in capital or research & development by UK companies.
Accounts receivable and accounts payable
For any business, but especially for startups, to keep track of money coming in and going out. The accounts receivable (A/R) statement shows all the money owed to the startup by customers or clients. The accounts payable (A/P) statement shows all the money that the startup owes to suppliers or other creditors.
These accounting for startups documents give a clear picture of the startup’s current financial situation. This information is essential for making sound business decisions and keeping track of cash flow. Without accurate A/R and A/P statements, it would be straightforward for a startup to get into severe financial trouble quickly.
Another necessary type of document for startups to keep is payroll records. These records show how much money was paid to employees and any withholdings for taxes and other deductions. Payroll records are essential for two main reasons. First, they provide evidence of employee compensation in a dispute. Second, they can calculate payroll taxes owed to the government. Payroll records must be accurate and up-to-date to avoid problems down the road.
There are many different accounting for startups documents and records that startups need to keep track of. Each one provides valuable information that can be used to make sound business decisions. By understanding the importance of these documents and keeping accurate records, startups can set themselves up for success.