Confirm that all of your financial activity gets recorded! The simplest way to achieve this is regular monthly reconciliation of your bank accounts -- balancing the checkbook to your bank statements. Verifying that all of your customers have been billed and that you've got documentation for all expenses is also part of the process.
Analyze your business' financial condition at any time by producing reports from your accounting system (which may or may not include formal financial statements, depending on your needs), and be able to communicate the information to you.
Monitor your tax situation and stay in compliance with regulations. If your business accountant and tax accountant aren't the same person, it's important that they be able to work together, because taxes will affect most aspects of your business. For example, one reason that proper expense classification matters is tax-deductibility. (And taxes themselves are a deductible expense!) Your business' organizational form -- sole owner, partnership, corporation -- affects how its income is taxed. You may have to collect and remit sales taxes. Employment and payroll taxes can get complicated, and must be properly withheld and paid on time, or things can get ugly. Even if you don't have employees, you won't escape the self-employment taxes.
Ideally, your accountant will be someone who has experience with your type of business, and who keeps her knowledge base current with continuing education, particularly in tax-related areas. You may need just periodic consultations and reviews with an accountant and/or tax advisor early on - but hopefully your business will grow. It's easier to get systems in place sooner rather than later, and expand them as you need them.
The stereotypical accountant isn't really known for his or her strong people skills, but communication between the accountant and the business owner is critical, and both parties need to understand what's going on. The accountant needs to have a grasp of what the business does so that she can relate that to the numbers in presenting the owner with the financial picture. The entrepreneur needs to understand what those numbers mean to her business. Both parties need to be honest, open and clear with one another.
Going into business on your own can be intimidating, but a trusted accountant will be part of your team -- a real asset -- and you won't be going it alone.
7 comments so far...
Flag as inappropriate Posted by Jo-Ann on 25th June 2008
Flag as inappropriate Posted by Michelle R on 21st April 2008
Hope that helps!
Flag as inappropriate Posted by Florinda Pendley Vasquez on 25th January 2008
Flag as inappropriate Posted by Single Ma on 25th January 2008
It's almost January! Time to hunt someone up before spring! (I like to file by the end of Feb.)
Flag as inappropriate Posted by MaryP on 27th December 2007
Flag as inappropriate Posted by Florinda Pendley Vasquez on 14th December 2007
These are great tips and I'm hitting print.
Flag as inappropriate Posted by Mandy Nelson - Dandysound on 14th December 2007