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How to Set Up a Bookkeeping System for Your New Business?

Starting a new business is exciting, but it comes with numerous responsibilities. One of the first things that you should establish in your business is the way you are going to manage your books. Why? And as you will see, without it, can quickly become a mess. The good news is that it is not difficult to establish a bookkeeping system.

So, let us go through the steps of getting it right from the start.

Step 1: Open a Dedicated Business Bank Account

One of the biggest mistakes that beginners make when managing their business is combining business and personal accounts. Thus, it makes it complicated for you to monitor your spending habits and can be a nightmare during the preparation of your tax returns.

bookkeeping system

How to Do It:
Visit your bank and open a business checking account. So, the business should use this account for all the income and expenses of the business.

Step 2: Choose a Method for your Bookkeeping System

You have two main options: manually or with the help of software. Manual accounting means keeping accounts in registers or using Excel sheets or any other general ledgers. However, the use of bookkeeping software is beneficial in a way that it can save time.

How to Choose:
If you want to avoid making mistakes, or spending too much time, you may turn to QuickBooks, FreshBooks, Xero or Wave. Moreover, these tools are easy to use and are designed for small businesses. Here is a detailed guide on bookkeeping software.

bookkeeping system

Step 3: Track All Income and Expenses

You must account for every penny your business earns or spends. Thus, to do this, keep records of sales, invoices, bills, and receipts. Without proper organization, you risk creating messy records and missing tax deductions.

How to Do It:
Develop subgroups for various kinds of revenue and expenditure (for example, sales, utility, supplies etc.). It is recommended to use your bookkeeping method to record each transaction.

Step 4: Reconcile Your Bank Accounts Regularly

Reconciliation means comparing the records of a business organization with its bank statements. This step ensures that your books are accurate and helps catch errors, like duplicate entries or missing transactions.

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How to Do It:
At the close of every month, tally your records with the statement from the bank. Moreover, try to find differences and eliminate them as soon as possible. Fortunately, most bookkeeping software come with a reconciliation tool to help in this process.

Step 5: Set Up a Tax Filing System

Taxes may not be the most fun, but a good bookkeeping system does not make them a problem. Specifically, you have to keep track of your papers and know what you are to submit to the authorities as a business.

How to Do It:

Be aware of your tax dates and calendar. Therefore, maintain a folder for all the tax papers inclusive of receipts, invoices etc. So, if taxes seem too complicated, find a professional to assist with the management of the taxes.

bookkeeping system

Conclusion
Establishing a bookkeeping system might not be the most glamorous of activities but it is one of the most important requirements. Thus, by opening a business account, selecting the proper method, tracking finances, and staying organized, you’ll lay a strong financial foundation.

Need help with your bookkeeping system?

McKi Bookkeeping is here to make your life easier. From setting up systems to managing your records, we’ve got you covered. Contact us today and let us take the stress out of bookkeeping!

 

 

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