If you’ve just started a new business it’s important that you have good bookkeeping records for you and your customer base. There are 2 basic systems. The first thing you need to do is figure out what kind of system fits your needs. Here’s the difference.
1.) Accrual accounting. This accounting method will count the expenses and income at the time they happen but not when you actually pay or receive them.
2.) Cash-based accounting. This accounting method counts income at the time you receive it as well as expenses as you pay them.
It doesn’t matter which method you decide is the best fit, you will want to keep your records accurate and up-to-date. Here are a few tips to help keep track of your finances.
* Bank statements. Use your bank statements to balance the books by reconciling your accounts to track your expenses and income.
* Business and personal funds. You should always keep any business and personal expense and income records separate. If you are ever audited by the IRS or need an audit for your business, you will be glad you did.
* Checks. You should always review any checks you write for accuracy as well as any canceled checks. This action will help to prevent fraudulent or unauthorized checks. When the checks are for a business and you have a partner, you might consider the idea of having your partner co-sign the checks.
* Computer Software. Having the right computer software is crucial for a small business. It will make it much easier to track income, expenses, prepare tax documents when needed, and give summary reports of your business financial activity. Be sure you backup your files either on a flash drive or in a cloud to ensure that if you get a computer virus or your computer crashes, you still have your records.
* Daily record keeping. This very important basic rule will help you keep accurate records. It only takes a few minutes each day and you will be less likely to forget to enter any daily transactions.
* Online transactions. If you pay bills or receive payments online, be sure to keep track of transaction conformation numbers. This will be important if there is ever an issue concerning any of your transactions.
* Organization. By organizing your records and documents, your records or any financial activity in your business will be at your fingertips when you need them.
Depending on the size of your business some companies find that it’s more cost effective to outsource their bookkeeping needs. At Summit CPA we offer multiple resources to keep your business on the right track. For more information, contact our office at (866) 497-9761 to schedule an appointment with our advisors.