7 points of Accounting Basics for Start-Up Business

The challenge of start a company is exciting, anyway there are some responsibilities like; get inventory, get business structure in order, get customers and sell your products. All that at the same time, also, you have to track important risk or metrics going out of business, within the first year. Here are 7 points that will help you to manage all:


1-    Open A Bank Account

Open a bank account for your business; it’s necessary before it can accept payments on behalf of the company. It is very important for avoiding problems and face customer’s complaints.

Using your personal bank account for transactions can be used for a court to come after your personal assets, so it is just not worth it. To have a separate business bank account establishes that you’re a serious business owner and prevents commingling of funds.

2-    Get Invoice Templates

It is important to not forget about your invoices. To create these ones on the fly when and as you need them it is a serious mistake. You can grab invoice templates from a reputable company, customize them and save time of creating invoicing.

 3-    Make A Budget Or Outsource Your Bookkeeping

This area can be outsourced for your convenience, you have to make sure that your books are in order and the payroll is paid on time.

Outsourcing this area, keeps a track of all your expenses and the outsourced service like accounting in Chile, adapts to your company easily and rigorously. Also they can do another functions you choose like manage the payroll or improve the invoices for example.

4-    Tracking Gross And Net Margin

The gross margin is the total sales revenue of your company minus the total cost of your products or services sold. This number is then divided by the total sales revenue and expressed as a percentage. The higher the percentage, the better, because it means you’re retaining more money.

Net margins are the other half of this equation. A net margin is the ratio of net profits to your revenues.

The function of the net margin is to show profitability, however a low net profit margin usually does not mean that your company is unprofitable

5-    Quick Ratio and Current Ratio

These are two metric that are measured together and tell you how liquid your company is, explain how much money you have on hand to meet current and unexpected results or liabilities.

The quick ratio takes all of the cash in your business, along with the account receivable and divides it by the current liabilities. It’s simple but it is a way to determine how you’re working financially.

The current ratio is the measure of current assets divided by current liabilities. Tells you, whether all of your assets that can be converted in cash, within a year or right now. It could be used to satisfy all of your liabilities in under a year.

If you obtain a ratio less than one means you may end up running short on money, while a ratio of more than one, means you probably have a good surplus.

6-    Account Payable and Receivable Days

These metrics measure how quickly you’re bringing in cash and paying it out. The accounts payable days is calculated by taking the amount you owe (your liabilities) and dividing it by the cost of goods sold, multiplied by 365 days.

A higher number is better, while all other things being equal. It is used because you want to retain cash in your business for as long as possible and only pay out when you need to.

Accounts Receivable Days is calculated by dividing this account value by total sales and then multiplying by 365. Lower numbers are generally better, but again this depends on the industry. You want to obtain a low number because it means you’re collecting cash quickly and retaining is for working capital and other company purposes.

 7-    Get New Customers



Your company has to make money and generate cash flow, one of your tasks is to focus constantly in get new customers so, you can market those products and services to them. It is very important to maintain good client relationships for the business.