Start Your Business The Right Way

Can you believe autumn is here… and so is the latest edition of Bean There, Done That?

Believe it!

In this edition, we discuss the many WRONG ways to start a business – and, of course, we describe how you can avoid making some all-too-common mistakes when you’re getting your company up-and-running.

Once again, thanks for making DK/RK Services your first choice in bookkeeping… and for passing this edition on to your many friends who’ll want to subscribe for a “monthly smile.”

Wishing You Heaps Of Fun, And A Healthy Serving Of Beans.

Start Your Business The Right Way

Bean There, Done That
Monthly Bookkeeping Wisdom From Your Friendly Bean-Counter

Here’s a true story, as far as you know:

Wanda had a job with Acme Weed Pullers, pulling up weeds and pulling down a decent hourly wage. But her employer, “Bossie” Bertha, was kinda mean. Bertha seemed to have adopted unkindness as a lifestyle choice. So one day, Wanda had had enough.

“I’m not pullin’ one more weed for that lady,” she said to herself, just before she called up Bertha and said “I’m not pullin’ one more weed for you.”

Wanda decided to go into the weed pulling business for herself. “How hard could it be?” she asked herself, just before she turned to her cat, Spuds, and asked “How hard could it be?”

After all, Wanda and her weed-pulling colleagues had been doing all the work, but Bertha had been enjoying all the profits of their labor. Now Wanda would be her own boss and keep all the profits for herself.

Woo HOOO!

***

After about eighteen months of business, during which Wanda had pulled up tons of weeds and pulled down a few nice checks from her new clients, Wanda took a look at some notices she’d been getting from the IRS and asked herself, “How’d I end up with such a confusing mess I don’t know how to file my taxes?”

Shortly thereafter, Wanda paid a visit to her Friendly Bean Counter (FBC) (me) and asked, “How’d I end up with such a confusing mess I don’t know how to file my taxes?”

The answer, though painful, was simple: Wanda hadn’t started her business in the right way, and certainly hadn’t been running it in a businesslike fashion.

Her FBC explained patiently and kindly (way more kindly than Bertha would ever be) that, the next time she started a business, Wanda ought to make sure to follow some basic practices that would keep her out of trouble like this – all of which her FBC would be happy to help with:

Choose, and use, a good accounting system. Find the system that works best for your business, and enter all your revenue and expenses in a timely fashion. If you’re not sure which system is best (Wanda was using her imagination, which is not an approved accounting system), get some expert advice from your FBC.

Set up your accounting system to work specifically for you. Wanda had one account – her personal checking account – and in just a moment, we’ll describe all the ways that was not her best move. Instead, starting your business on the right footing means setting up your accounting system with the right “chart of accounts.” Your accounting software will generally ask you a bunch of questions, and based on the answers you enter, it will set up a very general list of accounts for your business (rent, phone, mileage, clown parties, etc.) (just kidding on the clown parties) (unless you’re in the clown party business). But you can customize your chart of accounts to meet the specific needs of your company – especially with a little coaching from your FBC. (Your FBC might even do the customization for you.)

Draw a solid line between your BUSINESS and PERSONAL expenses and income. The IRS is very picky about this kind of thing. You can’t “co-mingle” your business and personal finances! So first, make sure you have separate business and personal checking and credit card accounts. When you take money from the business, record it in your program as a “draw” or salary; when you spend money, if it’s for a legitimate business purpose (no, Wanda, spa days are not really legitimate expenses for a weed pulling company), make sure to pay those expenses out of your business account and keep clear records. Every penny of Wanda’s funds were “co-mingled” in her single checking account, making her business accounting and tax reporting a nightmare.
Make sure everything is set up in compliance with tax obligations. If you have employees (Wanda dodged a bullet here), you have to have everything set up to pay payroll taxes and comply with other employer regulations. Your FBC can provide some very helpful advice in this area. And it’s way more reliable than Wanda’s imagination, I can assure you.

Find providers who can help you. You’ll want to consult your FBC, of course, and she will also have good referrals for you to pros who can help you with payroll processing, merchant accounts, tax advice and filings, and even things like hiring and marketing. Get a good team in place! Wanda had nobody to help her. Except her imagination. And Spuds.

I’m happy to report that Wanda’s situation is totally made-up, as is Wanda herself. But trust me: There are stories like Wanda’s unfolding all the time, and it pays to get your business off the ground the right way by setting everything up before you start co-mingling funds or otherwise getting into a big bookkeeping mess that makes it impossible to tell exactly WHAT is going on with your company.

Questions? Feel free to reach out to your FBC for a consultation.

The business you save could be your own!

Discussion Questions

Don’t forget: at DK/RK Services, you’re always “more than a number.” We WANT to take care of your bookkeeping, professionally and personably, so you can focus on running and growing a great business enterprise! Please check out our many enthusiastic FIVE STAR online reviews (Yelp, Google, Facebook, you name it). We look forward to earning our next great review from YOU.

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(Offer good throughout the Lower 48, as well as certain U.S. holdings in the Pacific, but definitely not in Spuds, Florida. See details on the Spuds, Florida social media page. I bet there is one.)

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