Blog Posts

My Blog

Blog

« Back to Blog « Older Entry | Newer Entry »

Setting up the Right Accounting System for your Business.

Posted on September 5, 2014 at 12:50 AM

Setting up the Right Accounting System for your Business.

Every Business needs a good Business Accounting System to increase their Business' chance for success. When Starting a Business, the first focus should be on building systems and processes, that allow us to accurately capture as much data as possible, from the setup process; It is important to remember that this process helps us to learn about our businesses and enhances our decision making, as well as giving us a better idea, of what is going on in our Business.

This Month, we will be looking at the processes of setting up the right business accounting system for our Organization. Below are some points to consider, when setting up your Business Accounting System:

Maintain Separate Books: When Starting a Business, the first thing to do, is to set up a Separate Bank Account for your Business, as well as a Business Debit/Credit Card. This helps to properly distinguish your personal expenses from your Business expenses, and enhances accurate tax deductions during tax periods. In addition, IRS Auditors are always quick to disallow expenses, when your Business Expenses are mingled with personal expenses.

Types of Business Entity: It is important to choose the right legal and tax entity for your Business. For Tax Purposes, Sole Proprietors use a 1040 Schedule C to report their activity, while other Business entities flow their profits into their individual tax return, through a Schedule K-1. The C-Corporations require separate tax returns, without a flow- through of the profits into the personal tax returns. Every Business Owner needs to think carefully about getting the right business entity, so that you will not have unpleasant surprises during tax periods.

Cash versus Accrual: These are the two approved methods of Accounting. The Cash Method is based on recording payments, immediately they are made, and revenues are recorded, when they are received. The Accrual Method is the method , whereby transactions are reported , when there is an established obligation. For a transaction to occur, this means that Income should be recognized before its receipt, and expenses are charged, before the Bill Payments. The Accrual Method of Accounting is actually the preferred method for most Businesses, especially for Tax Purposes.

Sub-Ledgers: Most Businesses recognize the need to organize their business transactions into accounting groups. These Groups use their own reporting system, known as " Sub-Ledgers", and they fall into these categories:

Accounts Receivables - Money Others Owe You.
Accounts Payables - Money, that you owe your Vendors
Sales - Revenue & Money, that you receive
Fixed Assets - Assets & Properties that your Business Owns.
Inventory - Goods & Materials that your Business holds for the purpose of Resale.

Bookkeeping Setup: Maintaining the Books is the most important part of your Business Account Setup, and is required by Law. Your Bookkeeping System incorporates all the above mentioned points, to create usable information, which enables you to see how your Business is doing and make wise decisions. There are various Bookkeeping Tools, to help you maintain your accounting records. Examples are Microsoft Excel, QuickBooks, Sage ,Xero; but the most preferred tool is QuickBooks, because it syncs with your Bank account and updates your records regularly, and this helps ,you stay on top of your account.

You need to spend time in setting up the right Accounting system for your Business, if you want your Business, to be successful. We know that it is easy to get caught up in all the administrative tasks and will suggest that you ask for help

Do you have the right Accounting System for your Business? It's not too late to set up a good system for you, why don't you give us a Call to help you out.

Remember: You are increasing your Business chance for Success, when you make your Account Setup, a priority.

Categories: Account Setup, Accounts Payables, Accounts Receivables, bookkeeping, bookkeeping,Tax Returns,QuickBooks,Bank Reconciliations,bookkeeping services,small business, Business forecasting, QuickBooks Setup, QuickBooks Software, QuickBooks Support, QuickBooks Training, QuickBooks,Small Business Bookkeeping,Bookkeepers rates,business decisions, Small Business Setup, Spending Wisely, Tax Returns, Tracking your expenses