Start-Up Accounting; Started Right: Part One

So you’ve made the leap- left the nine-to-five and bosses behind for a chance at complete creative and financial freedom. You have product and service ideas abounds, but now what?

Let’s start at the very beginning, where even just a little foresight in the early stages of your new company will save you countless hours and dollars down the road.  What are those important foundations to lay for your growth?

Business Entity Type.

Everyone needs to be a corporation so you can launch your IPO next week, right? We wish, but more often than not it isn’t the best option for small businesses.  There are many items that play into this decision, and I will of course add a disclaimer that a quick conversation with a business attorney will often times be worth its weight in gold.

What are your growth plans? Do you intend to add additional business partners down the road?  Do you want to sell your company as soon as it becomes established? Limited Liability Companies are trending to be the easiest solution for formation right now, and offers tax flexibility in being able to be treated as a Schedule C sole proprietorship, a partnership, or even as a Subchapter S Corporation. Incorporating your business offers unique ownership opportunities, including equity benefits for future employees, ease of bringing on new investors, and tax savings when the business is sold.  The corporate downside is double taxation; however, electing to be an S Corporation offers some relief.

Try to look at the big picture. Think about the future, think about growth, and consult with a professional to choose an entity that best fits.

Bookkeeping.

The greatest single planning and cost savings measure you can take is to maintain an accurate set of books. Technology today provides for easy, affordable access to powerful accounting systems over the internet.  This includes QuickBooks, FreshBooks, Xero, Wave, and Zoho Books just to name a few.  Affordable and all encompassing, offering everything from invoicing to payroll solutions.

Having clean, up to date books is a live report card for your business. It’s paramount to every decision you make, and therefore should be accurate.  Your financial data, over time, will provide historical trends, forecasting, and indicators to help guide your business plans.  Which product line is selling best? Which client group continually pays in a timely manner? What expenses are growing disproportionately? Every revenue and expense can be measured on a variety of metrics to help increase your profitability.

Another benefit of clean books that is often overlooked comes in April of each year.  Your tax accountant is going to comb through your general ledger, making adjustments as needed to correct bookkeeping errors.  This time spent in your books are dollars flying out the door.  Hourly fees billed can be greatly reduced by having books that are ready for this tax preparation.  If you have an expense or other item that you don’t know how to enter seek out the answer from a professional, don’t let the unknowns pile up to be dealt with later.

For a discussion on how Bellwether can assist with your new small business please contact us through our website, www.bellwetherpros.com

Let's Fix Professional Fees

When you pay for a service or purchase a product, isn’t there an expectation of customer service following the sale? Shouldn’t you be able to call up the retailer after you purchase that new computer if you have a question or two? The answer is a resounding yes.  With that being said, why don’t we demand the same from our professional providers? You paid for the principle service, so shouldn’t follow up assistance and follow-through be a part of that?

This trend is slowly evolving, as more and more professionals are beginning to offer fixed prices based on the service provided to the client – not how long it takes the professional.  There are a multitude of benefits for both the professional and the client.

-No Surprises-

In public accounting it never fails to receive a call from a tax client questioning a mid-year invoice that was sent for a phone call conversation regarding estimated tax payments.  They called the firm, discussed and solved the issue, with no mention by the professional of the cost of that conversation.  Why? Let’s be honest: It’s uncomfortable to discuss prices and billing.  This is an excuse, and a bad one at that.  In reality, the uncomfortable feelings are only compounded when you have to call later after the invoice has already been sent.  When fixed pricing is implemented, this service gets included in a fixed price plan for the income tax service and there aren’t issues down the road.

-Communication Hesitation-

When you know your professional is going to start the timer as soon as they answer your call you naturally hesitate to even make that contact.  Why is this a problem? That issue which needed an answer didn’t just magically solve itself. In fact, it was only further complicated because you made what you hoped was the right answer, or took the advice of a friend that had a “similar situation.”

Business owners engage with professionals to have them on their team right when they need them. Let’s cut out the hourly billing and make it a real relationship with open lines of communication.

-Budgeting-

How can you, as a business owner, plan and budget your expenses if you have no idea how long it will take for that professional (or their staff) to complete a project?  Of course there are exceptions, but professionals do this work every day and have a pretty reliable expectation of the time needed for a project in order to establish a reliable fixed cost figure.

-Efficiency-

Having a known cost encourages efficiency and mutual data improvements. The professional has a fixed amount, so it’s in their best interest to get your data in the best shape possible to cut down on their hours.  This is a commitment to the mutual relationship, as improvements are made to your systems to provide efficiency and reliability for years to come. You get a better, more reliable product in shorter time, and the professional improves on their efficiency. It’s a win-win that drives both parties.

-Competition-

Fixed prices give you the opportunity to compare firms apples-to-apples, knowing what you will get and what you will pay. Proceed with caution though, as some firms will try to cut their fixed costs down to minimal amounts, then tack on fee after fee.  Just be cognizant of this, and seek the complete cost before committing.

At Bellwether Professionals, Inc. we firmly believe in fixed cost structures.  In fact, most of our costs are published right on our website at www.bellwetherpros.com for reference.  In the event that your business has a special project that needs specific pricing, we’ll do just that – before any work ever begins.  Be confident in your provider, and don’t accept billing surprises.