Establishing your own business has become very simple in Latvia – everything can be done online from your own home.
Of course, the speed and ease may mask some hurdles, later translated into additional expenses. For example, you might want to take longer than a few seconds to contemplate your business name – changing it afterwards entails fees. Another decision to be made while filling in the establishment application is the financial year of the company. As a rule, most Latvian companies use the calendar year, however, in the case of seasonal activities, other options should at least be considered. Even if we do not notice it right away, this decision is the first step we make in the world of accounting.
The term “accounting” still very often sounds so complicated to entrepreneurially inclined minds that it may scare them into remaining paid employees for someone else. It is common knowledge that accounting is something so specific that it should better be left to professionals. Of course, hiring a professional or buying the service from an accounting firm is always an option but a newly founded company is usually very careful with every single euro. So, at least in the beginning, it makes sense to try and do as much as possible yourself.
To encourage you: no business should ever be left unestablished out of fear of accounting. Instead, this could be the place where you can save costs. It is no rocket science. Just like establishing a company, accounting is a perfectly comprehensive exercise.
First, as with any new thing, some learning is obviously in order. You need to understand the basic accounting concepts. Once you know what is a balance sheet and an income statement, take a step further. Courses and books on accounting are plenty and this small investment pays to ensure the smooth running of your company and avoid problems.
In essence, accounting is about organising different documents. Nowadays, this task is greatly simplified by software; you just need to choose a convenient and appropriately priced option. The help function and user guidelines provided with the program can give you added assurance. A growing company can also “grow” its accounting programme by adding users and functionalities.
A small company will probably not start out with complicated contracts. The bulk of incoming documentation is probably made up of purchase invoices to be paid and later retained. Today, most of the invoices move in an electronic format and should be retained electronically during a period of 10 years, according to the Republic of Latvia Documents and Archives Act. Once the purchase invoice is in the programme, a quick check and if everything is ok, send the invoice for payment. This is done automatically too; you just have to make sure that the program is set up to communicate with your bank account.
In addition to different expense and purchase invoices, you will have to deal with sales invoices. The programme is able to generate them as well. Select the customer you wish to bill for the product or service, select the product with its pre-defined price, and approve the invoice. Now you can send it to the customer as a PDF file or an electronic invoice and wait for the money to come in. As a result of the described actions, your financial reports will also be generated automatically, giving the company management a detailed overview of the business activities.
If you are diligent and willing to put some time into acquiring the basics, you can do it on your own. Doing your own accounting will save a lot of money for a small business and give you a competitive advantage over competitors paying hundreds of euros for this service.