The first step in responsible business management is to set up a reliable bookkeeping system. Choose a simple record-keeping system that is easy to execute and understand. It should be simple, reliable, accurate, and consistent. It should also give you the ability to access current financial data on a timely basis to allow you to see how the business is progressing.
Basic software systems, like QuickBooks, are inexpensive and user friendly. Also check to see if there are software programs made specifically for your business or trade that can make life simpler An organized bookkeeping system allows you to quickly and accurately handle daily financial record-keeping tasks.
If you have never done bookkeeping, have an accountant or ProAdvisor set-up your system. Time spent in setting up the system correctly in the beginning makes your bookkeeping tasks so much easier.
Once you are set-up correctly, follow your accountant's directions on how to properly categorize all transactions. There are five vital bookkeeping journals used to keep track of your financial transactions. These journals are all that are necessary for a simple cash accounting system. This system can later be converted to an accrual method of accounting (if needed) by simply using journal entries for accounts receivable, payable, accruals, prepaid insurance, and so on.
The five vital bookkeeping journals are:
- Check register - Shows each check disbursed, the date of disbursement, check number, payee, the amount of money disbursed, and for what purpose.
- Cash receipts - Shows the amount of money received, from whom, and for what.
- Sales journal - Shows the business transaction, date, for whom it was performed, the amount of the invoice, and sales tax (if applicable.) It may be sub divided to indicate labor and goods.
- Voucher register - A record of bills, money owed, the date of the bill, to whom it is owed, the amount, and the service provided.
- General journal - A means of adjusting entries in the other four journals.
Along with payroll records, your bookkeeping system will give you all the information necessary to complete tax reports and returns. At the end of each annual accounting period, all the information for filing tax returns will be easily accessible. The information from these 5 journals provide what you need to prepare your financial statements.
Need help setting-up, reviewing or keeping your books? Contact Quality Accounting Solutions for a FREE one hour initial consultation. We are ready to focus on your financials, so you can focus on running your business.