Business Startups

Most people who deceide to start their own businesses have great ideas for their business. They may even be experts at what they do in their business. However, most people who start their own businesses fail to realize that they need a team of experts to back them and help them to get their business going. Most experts say that for the person who is starting their own business, they should have a board of directors behind them, and that this board should contain successful business owners, accountants, bankers, insurance, investment, and legal advisors.

Startup businesses often fail to consult with an accountant when starting their business because they feel the accountant is not practical for a startup business. Startup business owners often feel that accountants are too expensive to consult with when starting their business. While this may be true, it is often the best investment a startup business owner can make in his or her business.

There is a lot of off-the-shelf accounting software on the market that is relatively cheap to purchase, and - according to many advertisements for this software - very simple to setup (one such ad claims the software can be setup and running within 15 minutes). Although this type of advertising in not wrong, it is very misleading - especially for those people who do not have a background in accounting. Also, because there are so many different accountant packages available to choose from, many times, the startup business owner does not know which software is best for his or her specific business, and may purchase an accounting software package that will not work well for his or her business.

Many startup business owners purchase an accounting package and try to setup the software on their own, without consulting with a knowledgable accountant. This often leads to more problems and higher expenses for the startup business. Inaccurate aging reports for accounts receivable and accounts payable. Inventory not being correct. Profit and Loss statements not being correct. These are just a few of the problems I have seen.

An accountant knows how to properly setup an accounting program so that inventory, accounts payable, accounts receivable, payroll, sales tax, etc. are set up so that the business owner can run accurate reports. An accountant can also help the startup business owner to choose the best accounting software for the type of business that is being started.

Look at the following example of a startup business that chose not to consult with an accountant to help setup their accounting software.

ABN Company started their business on January 1. The owner, Jim, decided to purchase accounting software and setup the software himself. He proceeded to install the software and set it up. However, he did not setup the software correctly. He entered A/R and A/P balances for each customer and vendor without entering the individual invoices for each customer or vendor. He also did not setup his inventory items correctly so that they did not reflect the correct income and expense accounts. He made a mess of setting up the accounting software, but did not realize the error(s) until almost 7 months later.

Had Jim consulted with an accountant up front, he would have payed perhaps $2,500 to get his accounting software setup properly. Since Jim waited until 7 months after he had purchased and started using his accounting software, he was now looking at nearly $7,500 to correct the errors in his accounting software. In fact, it would be easier to start over from scratch (start a NEW company data file) and reenter everything (at a cost of nearly $6,000).

Had Jim waited until the following January or February to take the erroneous accounting information to an accountant to do his business taxes, it would have cost him even more. His business tax return would have cost him 4 or 5 times as much to have it prepared correctly, and the accountant most likely would not have corrected the data in the accounting data file.

As an accountant, I have worked with clients who have come to me when they first start their businesses. They may not like the upfront cost, but they realize it is an investment that will pay off in a relatively short period of time. I have also worked with clients who have setup their own accounting software without consulted an accountant to help them. I have had clients who have used their accounting software for several years, making erroneous entries the whole time. These clients have come to me to "fix" their accounting problems. I have told this type of client that the cost would be extremely cost prohibitive to "fix" their current accounting data file. t would be cheaper to start a NEW data file and reenter all the data rather than trying to fix a data file with so many errors in it.

If you want to do things right, and have a successful business where you know your accounting software will give you an accurate picture of your business, then you should check with an accountant before setting up your accounting software. You would not draw up legal documents without consulting a competent lawyer who is knowledgable about the type of legal documents you are wanting to use.

If you would like to contact me regarding the above article, please feel free to contact me at mastertype@mabspc.com.