Biz Accounting Made Easy: 3 Steps To Getting Started
Kick starting a new business requires comprehensive knowledge about a plethora of different industries—including accounting. Keeping your business’ finances in order is absolutely vital to ensuring you are hitting your goals, staying on track and growing as a business. Even if you don’t come from a financial background, be sure to learn the ins and outs that will help position you and your team from long-term business success.
Here are three important steps for setting up your business’ accounting system.
Open a business bank account
The first step to initiating your business’ accounting system is setting up a business bank account. This allows you to effectively keep your personal- and business-related finances separate, and better track your expenses and revenue. It also helps you ensure bookkeeping accuracy, since you can cross check your finance records with your monthly account statements.
Tip: A business bank account also comes in handy when it comes time to file your business’ income taxes
Decide on an accounting method
There are two methods that drive accounting systems, and you’ll need to choose one. Cash-basis means you record income only when money reaches your account, and you record expenses only when money exits your account. The accrual method requires you to record two entries for every transaction: once when you receive a check or invoice, and once when the funds reach their final destination.
Tip: Once you select a method, decide if you’ll be doing your own accounting by hand, using accounting software or hiring a professional.
Develop a chart of accounts
A chart of accounts is an essential organizational tool that provides a complete listing of every transaction your company makes. This enables you to compile and review everything in one place, gain valuable information about your current financial state and progress and easily locate specific transactions that need to be reviewed.
Tip: Even though a chart of accounts is a reliable tool, still be sure to cross check your transactions with account statements on a regular basis.
No matter which accounting route you decide on, your main takeaway should be to remain diligent and organized when recording and keeping track of your expenses and income. Achieving this important goal may mean fine-tuning your system on an ongoing basis or hiring an outside consultant to take on the job.