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One of the biggest headaches for new small business owners is bookkeeping. If you’ve never gone beyond balancing your checkbook, keeping the books for your business can be an overwhelming process. Your company’s books must be impeccably kept. Here are tips to setting up your books so that they are both accurate and legal:
1. Software and Ledgers
If you’re just starting out,
most experts recommend keeping two sets of books. You can utilize software for one set and a hard, written copy for your second set of books. Because there is a learning curve for most people when it comes to accounting software, keeping a written ledger will allow you to compare your figures and make sure that your software is working correctly. You can typically move to a software-only system after six to 12 months.
2. Debits and Credits
Also called expenses and revenues, debits and credits are the monies that come in and go out of your business. When you’re balancing your books, your credits must equal your debits. If this doesn’t happen, something has gone wrong and you’ll need to perform your calculations again. Just as you balance your checkbook each time you make a transaction, you should balance your company’s books every time money comes in or goes out. You’re less likely to make an omission if you take five minutes every day to balance your books.
3. Accounts Receivable and Payable
If you sell goods or provide services to customers, you’ll need to keep track of your accounts receivable and payable. These are the bills that customers still need to pay and the debt that you need to pay others. Keeping track of your accounts receivable is not only required by law, but it will ensure that you don’t let an invoice slip through the cracks.
If you keep
an inventory, including office supplies, electronic equipment and anything that you sell or provide to your clients, make sure that you have everything down on paper. You should keep records of your purchase dates, serial or stock numbers, price you paid, date you sold the goods and the price you sold them for. Keeping an accurate inventory is not only proper accounting procedure, but it will protect you in the event that your office is burglarized.
5. Professional Help
If you’ve never taken an accounting course or are anxious about keeping your own books, hiring a professional to set up your bookkeeping system and help you for the first year can be incredibly helpful. In fact, you may consider keeping a bookkeeper on board part- or full-time. A professional accountant can ensure that your books are both accurate and legal. When it comes time to file your taxes, an accountant can make sure that they are filed correctly, reducing the amount that you owe or increasing the amount that you are due by way of a refund.
Bookkeeping for your small business isn’t difficult once you understand how it needs to be done. If you follow the tips above, you’ll be sure to have an accurate record of all of your company’s transactions. If you think that you would be more comfortable leaving your books in the capable hands of someone else, hire a professional to do the job for you.
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