A bookkeeping system is essential for any business, no matter how small. You have several options in setting up a basic bookkeeping system. The five basics of a bookkeeping system are:
- Check register that records each check, much like a personal checking account.
- Cash-receipts account that tracks incoming money.
- Sales journal that shows each business transaction, what business took place, the amount of the invoice and the sales tax.
- Voucher register that records bills, money owed, the date of bill, who it is from and what service was given.
- General journal that allows you to adjust the entries in the other four registers.
Computerized systems do the math easily and accuratelyMost small businesses choose software over manual bookkeeping systems. For about $200 or less, you can get a good package for your startup business. Don't buy a system that's too complex, but also avoid a system that will have to be replaced in two or three years when your business has grown.
Business.com. See reviews and a handy comparison chart of bookkeeping software at CNet.
Paper systems are convenient for very small businessesIf you're just starting your business, a manual, or paper, bookkeeping system may be the way to go.
Single-entry is simple and straightforwardSingle-entry is the simplest way to set up a bookkeeping system. Transactions are listed as a single transaction - not as a debit and credit, as is done in a double-entry system.
Ohio State University discuss single- versus double-entry systems.
Double-entry allows you to track more dataMost larger businesses use double-entry bookkeeping, as single does not give detailed information about the source of the gain or loss. Double-entry bookkeeping gives a business a detailed picture of its true financial position, not just its cash position.
When in doubt, call in a professionalIf all this talk of computers vs. paper and single- vs. double-entry seems daunting, don't hesitate to call in a professional to help you set up or maintain your bookkeeping system. The services can be relatively inexpensive and setting up a good bookkeeping system is critical to the success of your business.
- Even if you choose a computer program for bookkeeping, you still have to maintain appropriate backup paper files. Those should include paid invoices and receipts from vendors, purchase orders, paid bills and deposit records from customers.
- Maintain a clean audit trail of information.
- Record the date paid, check number and amount paid on each invoice you pay.
- Keep a copy of each check received from customers and attach that to deposit slips so you have a record of each payment received.
- Keep as detailed a record as possible of the invoices sent to customers, and the outstanding amounts due.