Keeping accurate and up-to-date records is crucial to a successful business. Records are the most important management tool you possess, and they come in handy at tax time, too. An accountant can help set up a recordkeeping system, or you can find books and forms to get you started. A good rule of thumb is to keep your records as simple as possible.
Before you start your business, be sure to open a business checking account. This will help keep your personal and business finances separate and will provide a record of deposits and expenses. Avoid using the business account for personal expenses.
Besides financial records, depending on your type of business, you may need to keep track of other information, including but not limited to:
- Client Contacts
- Petty Cash
- Employee Data
- Telephone Calls
- Accounts Payable
The ability to find and use information when you need it is invaluable. You can keep track of your information manually or use one or more of the many computer programs available for small businesses. Be sure to back up your work!
Accounting is one of those topics that make people nervous, but keeping books doesn’t need to be complicated. In fact, simplicity is the key to a good system for small businesses. Keep in mind that your records need to be complete so you have the information you need for business decisions and taxes.
There are two basic bookkeeping methods: single entry and double entry. Single entry is simpler, with only one entry per transaction. Most small businesses can operate adequately with this system. Double entry requires two entries per transaction, which provides cross checks and decreases errors.
There are two main methods of keeping track of the money coming in and going out of your business: cash and accrual. Most small businesses use the cash method, in which income is reported in the year it is received and expenses are deducted in the year they are paid. Under the accrual method, income is reported when it is earned and expenses deducted when incurred, whether money has changed hands yet or not.
The accounting methods you use will depend on your business. You may want to talk to an accountant for help in setting up your system. Even with the support of a professional, you should understand your own system thoroughly.