The entrepreneur has countless things on their mind at any given moment. There is after all plenty to consider when starting a business. How the entrepreneur starts his venture will have everything to do with how it grows and when. Usually when an entrepreneur ventures into his or her startup they aren’t thinking about possible exits or routes for expansion, but they should. If your company is going to grow you have to know exactly where you stand in order to be prepared to grow too. Consider the four following common missteps.
1. Invest in your general ledger
It is often a tedious and bland part of the startup process, especially for beginners. Usually, they will rely on basic accounting software and be done with it. For most startups this is acceptable, but you don’t know what road lies ahead. It is important that once you are into your journey neck-deep you are prepared with a ledger, that hasn’t missed a beat, and that can provide the evidence you need of the exact value you have built. I recommend considering hiring a professional just in case you find yourself in waters over your head.
2. Keep Business, Business
It is tempting to twist and tweak expenses and use company funds for personal use with a justification. Avoid this common misstep at all costs. Here’s why: The generally accepted accounting standards (GAAP) for business expenses, are sometimes subjected by beginners to liberal interpretations, or basic improper reporting. Not only could this be the beginning of the end for your company if the IRS gets involved, but it also skews the true value of your business when you aren’t keeping the proper expense records.
3. Report all revenues
This is another big and enticing misstep that is commonly made by beginners. It is tempting, especially if you deal with a lot of cash, to skim money from the start and justify it in different ways. Once again, this gets a lot of newbies in trouble with the IRS and also undervalues your company in the long run. It will be difficult to show and understand the true value and growth of your company if numbers are being misrepresented.
4. Keep very careful records/receipts
A beginner often assumes that going down the straight and narrow means giving more of their hard-earned money to the government in taxes. This is generally never the case. Invest in a good book or a professional advisor to show you the legal routes and bypasses you can take, and keep every record no matter how seemingly inconsequential. You will need these records to prove to yourself and others exactly how valuable your company is at any given point in time. You cannot progress and move forward if you don’t keep track of exactly where it is you and your new business stands.