When you’re dreaming about starting a business, accounting might not be a very interesting subject. When you think of accounting, you might think of complicated spreadsheets. However, good accounting is fundamental to a strong business, and if you want to make money, you will need to understand the basics. There are several areas you might want to focus on.
Educate Yourself about the Basics
There are lots of things you should understand before starting your side hustle, so you’ll need to spend your time doing your research before doing anything else. As accounting is a very in-depth subject, you might consider taking some accounting classes online or at a local community college. You could even consider getting an accounting degree, which can be a thorough way of preparing to be a business owner. If you’re thinking about going to college, you can find private loans for college that can make it much easier to cover the expenses.
Track Expenses and Income
It’s important to track both expenses and income so you can reduce reoccurring business expenses and see how much profit you are making. You will first need to figure out a method of tracking. You can use spreadsheets or special software dedicated to tracking these things. You will want to start this record keeping as soon as you have started your business, even if it’s just a small side hustle at the beginning. If you wait, you will find it much harder to go back and try to fill in all the missing information. You can even hire an accountant to come in and check out the records regularly to make sure everything is accurate.
Prepare for Tax Season All Year Long
You need to pay taxes on the money you earn, even if you start your company as a side hustle opportunity. If you don’t earn that much, you might be able to just ask your main employer to withhold more taxes from each paycheck. But it’s still important to do your research on taxes ahead of time, and consider talking to an accountant, who can give you tips based on your current situation. You may lose money during the first several years of your business. But even if you don’t see profits, you will still likely need to file tax returns, so don’t neglect this important step. Knowing in advance how taxes will likely affect your organization can help you be ready.
Understand the Balance Sheet
Balance sheets are statements showing capital, assets, and liabilities. The standard formula is to add your equity and liabilities to equal your assets. Both sides should balance when you put the numbers in. You might not use this sheet much when you first start, especially if you begin on a smaller scale, but like other aspects of accounting, it will become important as time goes on. That’s why it’s important to keep this information handy at the beginning. You may need this information when getting funding from investors or banks later on. The sheet also offers an overall look at your business.