1. Faith Audi
ACCOUNTING FOR BUSINESS START-UPS
BY
FAITH AUDI

2. Faith Audi
ACCOUNTING STEPS TO KICK START YOUR BUSINESS…
What is accounting?
It is a systematic way of keeping transaction records for individuals or entities, for purposes of
effective and efficient decision making.
Why do we need it anyway?
• To gauge the financial health of our businesses.
Good accounting records show a true picture of the Financial performance of our company.
also shows to our funders how serious we are with our ventures.
• To ensure savings on time and money in the long run
Setting up an accounting system early saves you the fees for accounting services later on, and
the hassle of manually entering transactions.
• For securing additional funding in the future
Well-kept accounting records are vital in accessing loans, as they depict an element of credit
worthiness.
It also shows potential investors a n aspect of credibility and professionalism, which yields
confidence in pumping in their funds into your venture.
• To achieve long term goals
Good accounting enables formidable decision making.
Clear accounting data gives a clear understanding of the Financial Position of the entity and
hence enables easier decision making going forward.
Common accounting terminologies
Asset
This basically means what you own including cash in hand. In the context of the business, what
it actually owns. It depicts your VALUE.
Liability
This refers to what you owe other people/entities.
NOTE:
If LIABILITIES>ASSETS-need for reality check. Something’s wrong

3. Faith Audi
LIABILITIES<ASSETS-comfort and progress
Income Statement
It is a report card for your business.
It shows all the incomes and expenses that your business undertakes. The net figure is either
the Profit or Loss.
Balance sheet
This is a summary of what you own Vs what you owe.
Cost aspect
Fixed cost Vs Variable cost
Fixed cost
Refers to a cost that remains unchanged regardless of a company’s output or revenue. They do
not vary with the goods and services produced or sold in the business.
Examples include: land rates, salaries, tax, insurance, utilities.

4. Faith Audi
Variable cost
This is a cost that varies directly with the goods produced or services rendered.
Accounting Steps to get your startup going…
It is good that we all dream about being the boss of our own successful business, but we do
realize that many small start-up businesses end up in bankruptcy within the first three years.
“Why?”
Have this picture in your mind
Your mum gives you Kshs 1000 note with a list of things to purchase from the stores, upon
coming back, she asks for the balance then inquires as to why that was the balance. You will
then list down the number of items with their purchase prices and get the difference from what
was given. THAT’S ACCOUNTING.
It involves the inflow and outflow of money
However, accounting does not end up in balancing cash flows only.
With this knowledge many startup owners always feel they could very easily work as their own
accountants. However, once you decide to establish your business, you need to remember you
are no longer dealing with cash outflow and inflow only but other aspects of finance like
budgeting, forecasting and planning, monitoring cash position, analysis and decision making.
Now, you are an entrepreneur; therefore, you have to start thinking like a business person.
your education in general business to handle all the demands that will be put upon you.
Most business owners know they need to keep accounting records in good order; however,
their focus is mainly running a business itself and they simply don’t have time to maintain their
books on a day-to-day basis. Also, they only have a little knowledge of bookkeeping or
accounting; therefore, they would rather avoid this chore by having family member do it. But
there is no guarantee it will be done accurately.

5. Faith Audi
Get your books on track!!!!!!!
What comes where?
Open a bank account
Donations, grants and other incomes can easily be tracked; expenses can be reconciled.
Are you still a sole proprietor? Get the account in your name.
Best deal registers your business you need to:
• Draw a line between the business and the owner.
• Have a banking record for the business for future use, i.e. securing loans
Do not forget to do your homework. Shop around for business accounts and their ledger fees.
Remember most banks tend to charge higher fees on business accounts than personal accounts
this however does not mean you get a personal account in place of a business account.
Track your expenses.
“Money out” this is what gets you bankrupt. If you have no “money in” be prepared for a close
down.
Ask yourself
§ Do we need to spend it?
§ How do we need to spend it?
§ What will be the return on spending it?
§ When will we realize this benefit/return?
With these answered you have to track every expense as this will form basis of decision making
on how much was spent on what and the purpose for the expenditure.
Develop a book keeping system
What’s book keeping?
This is the day-to-day process of recording transactions, categorizing them and reconciling
bank statements.
As a new business owner you can decide to go DIY route and install software like QuickBooks,
Xero or you could use simple spread sheets
You could have a part time book keeper and if you have the money why not?
Go ahead and hire an accountant

6. Faith Audi
Set up a payroll system
This could be as simple as using spreadsheets. For the purposes of
Record keeping
Tax calculations for different categories of individual employees i.e.
Contractors- Withholding tax
Employees- Payee, NSSF, NHIF
If you are using excel, visit aren.co.ke for tax calculations
Determine your tax obligation
Are you a limited profit making entity? Are you an NGO? The answers to this will define your
tax obligation.
Always be tax compliant. It may seem expensive but being a good citizen is a requirement and
an obligation and this defines what your business is.
This has to be reflected on the payroll
Ensure you remit the taxes to the government
Reevaluate your methods
When you first start out you may opt to use a simple spreadsheet to manage your books but as
you grow you’ll want to consider more advanced methods like QuickBooks, sage, Uhasibu,
Xero, Zoho books etc. As you keep growing, it’s good to continually reassess the amount of
time you’re spending on your books, and how much that time is costing your business. The
right bookkeeping solution means you can invest more time in the business with bookkeeping
no longer on your plate, and potentially save the business money. Win-win!
Petty Cash Template
Date Money In Money Out
Opening Bal 1/1/2000 20,000 Travel Admin Stationery Fuel
2/1/2000 1000 1200 500 2000
8/1/2000 500 1400 200 850
12/1/2000 900 1200 100 2000
24/1/2000 1100 1250 200 1700
31/1/2000 3500 5050 1000 6550
Closing Bal 31/1/2000 3,900

7. Faith Audi
Indicators of Company’s performance.
ü The entity’s cash flows, that is, Cash inflow Vs Cash outflow
ü Nature of accounting records; How accurate are they?
ü Timely payment of the entity’s periodical obligations, for example, fixed costs, loans,
statutory payments.
ü Target patterns; how soon or late are the set targets met.
ü You have an accurate idea of the operating costs.
ü Self-remuneration.
General Activities
• Maintenance of financial books -Recording all transactions in a timely manner
• Reconcile all accounts by 10th
of every month- Bank, Petty Cash, Mpesa and any other
mode of payments and receipts
• Maintenance of bank accounts -Ensuring there is enough deposit to pay suppliers, and
payments are made with due process followed
• Processing of payments- Ensure due process is followed in authorization and they are
done in a timely manner
• When making payments, ALWAYS
§ Ensure that you have an invoice before making a payment
§ Write the payment details on the cheque stamp
§ Make a copy of the cheque
§ Ensure the person picking the cheque signs for it
§ If its cash, always sign for it
§ Stamp all payment vouchers PAID, once a payment has cleared off
• VAT and Withholding tax returns done by 18th
of every month
• Audit- carry out pre audits in preparation for main audit which should be done by 30th
June of every year. It’s always advisable to have this early enough and have the annual
returns for the company submitted in a timely manner.

8. Faith Audi
• Ensure annual returns (for the previous year) are filled in a timely manner. Deadline is
always 30th
June, its always advisable to have this done earlier enough to avoid last
minute rush.
• Keep your files with all documentations
• Label all files for easy identification
Conclusion
Starting a business can be an overwhelming process, but if you follow this list, you’ll have
your new store’s finances in order from the beginning. From opening the right type of bank
account to determining how much you’ll bring in per product, these tasks will all contribute to
your business’s success, now and as it grows.