Congratulations on making the decision to start a small business in California. Few endeavors are more exciting or rewarding, but entrepreneurs beware: in a heavily regulated state like California, businesses are required to keep extremely detailed financial records, and economic competition between startups is fierce. No matter how useful your startup’s product or service is, failure to attend the company’s financial matters can sink your business before it even sets sail. Fortunately, following some basic accounting tips will increase the odds of your company thriving. If you’re thinking about launching a startup in California, or if you’ve recently opened a business, contact the Sacramento small business accountants of Cook CPA Group for meticulous tax, accounting, and bookkeeping guidance you and your team can trust.

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4 Basic Accounting Tips for Startups and Small Businesses

You launched your startup because you’re passionate about your ideas – not because you wanted to spend your time sifting through complicated financial documents. Accounting may not be the most exciting part of starting a business, but it’s certainly one of the most critical. If you neglect this component of running a company, it will only a matter of time before the business fails. If you’re serious about beating the competition and making an impact in your industry, follow these four business accounting tips for improved odds of sustained economic success.

Tip #1: Determine what method of accounting is right for your startup. One of the most fundamental financial decisions your business must make is how accounting will be handled. There are two basic types of accounting for small businesses in California: accrual accounting and cash accounting. Accrual accounting tracks transactions when services or products are rendered or delivered, no matter when payment is actually received. In contrast, cash accounting – which is often favored by small businesses due to its comparative simplicity – counts expenses and income when received or paid out. Note that, depending on sales and inventory, you may be required to use accrual accounting methods.

Tip #2: Consider using QuickBooks software to help you manage data and transactions. In the digital era, accounting software is a lifesaver for small to mid-size businesses. While many options are available from entrepreneurs to choose from, QuickBooks is generally the most useful product for startups. Not only can QuickBooks save you time by automating reports and streamlining workflow, it can also help you devise business strategies, reduce accounting errors, and even accept payments. For more detail, see our article on 10 reasons why you should be using QuickBooks for accounting and bookkeeping.

Tip #3: Make a habit of keeping organized financial records. Like it or not, paperwork and digital documentation is the backbone of any business. To be successful, you’ll need to maintain meticulous records. If organization isn’t one of your strengths, now is the time to start practicing.

Documents you should track and preserve include bank statements, commercial leases, credit card statements, equity agreements, insurance forms, payroll information, receipts from business purchases, tax returns, and vendor agreements. Keep physical folders, or folders on your computer (with backups), with dated and alphabetized records for easy access. You should also save paper or digital copies of written or email correspondence you have with investors, vendors, and clients. You’ll thank yourself when tax season comes – especially since you’ll need detailed records to claim credits and deductions for your business. If the Internal Revenue Service (IRS) audits you or sends you a tax bill, you’ll already be halfway prepared.

Tip #4: Consult with tax and accounting professionals who have experience serving companies like yours. Of course, there’s no startup exactly like yours – but your CPA or bookkeeper should understand the unique challenges and regulations affecting your type of business. For example, if your startup is going to be a brewery, winery, or distillery, your business accountant should already be thinking about ways to help you financially prepare for industry-specific issues like crop damage from poor weather, production delays related to aging your barrels or hops, and the costs of purchasing vital equipment. At Cook CPA Group, we serve many types of industries, enabling our small business accountants to effectively target your unique needs.

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Tax and Accounting Firm for Small Businesses Serving Sacramento and Roseville, CA

The knowledgeable team of accountants and consultants at Cook CPA Group has more than 20 years of experience serving S corporations, C corporations, limited liability companies (LLCs), general partnerships, limited partnerships (LPs), sole proprietorships, and nonprofit organizations. Whether your company has two employees or two dozen, we can identify your business’ strengths, vulnerabilities, and objectives to help you increase efficiency, eliminate waste, and maximize profitability.

Serving business owners throughout the Sacramento and Roseville area, our Sacramento CPA firm provides tax preparation and small business accounting services for a diverse array of industries, including but not limited to:

If you own or co-own a small business in the Sacramento area, we invite you to contact us for assistance with all your business consulting and tax planning needs. To speak with our Sacramento business consultants and tax professionals in a free consultation, contact Cook CPA Group at (916) 724-1665 today.