May 9, 2020
Experience Series: Accounting
This post is part of my Experience Series where I share opinions I have formed from building companies and running product. Each posting is a break down of a company function. This post focuses on accounting specifically.
Unless you enjoy wasting money, you are going to want to track your expenses. Do that with a spreadsheet or free service. Even if you don’t make any profits, you still need to file taxes.
- This seems obvious, but some people just throw expenses on their credit card and pay the bill each month. When you are running a small business, you should constantly be evaluating your spend and justifying the services you pay for each month.
When it’s time to file taxes, work with an accountant to maximize your losses and handle your write-offs. Do not file your own taxes.
- Apart from time saved, having someone else do your taxes moves the liability over to them. It’s easy to make a mistake and just not worth the time.
Setup a separate bank account for your business and get a debit card or some way to pay for services. This makes tracking expenses much easier.
- Setting up a new account takes less than an hour and once it’s done, there’s no need to do it again.
Project your burn rate for the company and know how long you can be alive based on your spend. Models are free, so build them out. Worst case, best case, whatever case you want. Don’t let your accounts go to zero.
- Another easy step that a lot of people don’t do. Just because your business is doing well this quarter, doesn’t mean it will the next. Ensure you do not overspend and that you can actually project your revenue for the year and beyond.
Learn to be thrifty and take pride in getting the best price. If you are paying for services, see if there is a discount for small businesses. If you want a discount, consider offering up a testimonial or some well-formed product feedback. If you can hack a small solution together instead of paying, do that.
- Notice I state discount, not “free”. Asking for free services can offend some people, especially if they are trying to build a business just like you. Value does not always need to be in the form of money and it’s clever ideas like that which can get you discounts.
Taxes can be complicated. If selling in other countries outside the United States, make an attempt to understand what’s required of your business or consult an accountant.
