How to Set Up a Bookkeeping System for Your Small Business

I know from experience that there are a lot of moving parts involved in starting a business, from setting up your physical space to launching your website. You’re in charge of making all the decisions and it can be overwhelming. You can’t do everything at once, so some things will just have to wait, but your accounting system needs to be one of the first things you set up.

Your cash is the lifeblood of your business and you can’t afford to procrastinate when it comes to making sure everything is in order, especially when you’re in a highly regulated industry like healthcare. The last thing you need is to get audited and not have immediate access to all the information you need.

Your accounting system doesn’t have to be complicated, but an Excel spreadsheet is not going to cut it. Instead, you need to follow these steps:

Set Up a Business Banking Account

As soon as you’ve incorporated your business, you need to set up a checking account for your company. You have to keep all your business finances separate from your personal finances, because if you don’t and your business gets audited, your personal finances could also get audited. That’s why setting up a business bank account right away is so important, so you can make sure all your income from the business goes into your business bank account and all your expenses for your business get paid out of that account.

Choose Your Accounting Software

QuickBooks is probably the most well-known accounting software for small business owners, but there are other options, including a few free ones. Just keep in mind that the free ones have limited capabilities, and QuickBooks has different levels, with the more expensive levels allowing you to do more, so be sure to do your research before making your decision because you don’t want to commit to something that doesn’t provide what you need.

Set Up Your Accounts

Once you’ve chosen your accounting software, it’s time to set up your chart of accounts within the software. This gives you the ability to record your income and expenses under the right chart of accounts and make any notes you need in the details of the record of that transaction (customer/vendor, description, amount, date, etc.). Just don’t get carried away by adding too many accounts in your chart – the simpler it is, the easier it will be to keep everything organized.

Keep Track of Your Receipts

Whether your receipts are kept in a physical drawer or in a digital folder somewhere secure, it’s important to keep track of them so you have a record to look back on whenever you need to do so. Ideally, you should keep digital records as well as hard copies because hard copies can be easily lost, or sometimes the ink can rub off within the time frame the IRS requires you to keep records of your income and expenses.

Know Your Tax Requirements from the Beginning

Don’t wait until April to figure out how much you owe in taxes, because you might need to pay taxes throughout the year. For example, if you have an S Corp, your taxes are due in March. As soon as you establish your business, you need to make sure you know which tax laws apply to your business and what it means for the taxes you owe.

Make a Date with Your Bookkeeping System

If you don’t have a bookkeeper to stay on top of your business’ finances for you, make a recurring appointment to go over your accounts on a regular basis so things don’t slip through the cracks. Your financial check-in should be no less than once per month, but the more often you can do it, the better – ideally once a week.

If you don’t have the time necessary to stay on top of your bookkeeping, don’t hesitate to reach out now. With my help, you can spend more time working on the aspects of your business you love, and have peace of mind knowing your business’ finances are in order.