Keeping track of your finances

For business start-ups, the most important thing to remember when it comes to your business records is to document everything. From keeping receipts to processing employee payroll, it all has to be written down or entered into a system and kept track of for the IRS to determine taxes to pay.

It’s important to develop good habits around your book keeping and record keeping right from the beginning, as it’s critical that you keep track of the money coming in and going out of your business. 

A spreadsheet

An option is to keep a simple spreadsheet, which can be good option when you’re just starting out or the business has started out part-time and you’re trying to keep expenses low. If your business becomes more complicated later on, you can make the move to an accounting software.

Using a spreadsheet means you can:

• Set up your own basic accounting system to track invoicing, calculations and setting up a budget
• Give the records to your accountant so they can export to their software to process your accounts

Accounting software

If you’re serious about starting a business, it’s probably wise to subscribe to accounting software (many are free) that links to your bank account. It’s a full-proof way to document everything you need to collect, and you’ll reduce the risk of errors. Software will do a lot of the thinking for you, as it’ll have features to generate professional-looking invoices, keep track of who owes you money, help you enter everything accurately for your accountant at tax season and remind you when things are due.

If you use cloud-based accounting software, you’ll gain increased benefits such as:

• Seeing all your accounts in real-time. The software will link to your bank account, so all you need to do is view your cash position inside the software
• Increased security as if your computer crashes, your data is backed up in the cloud. If someone steals your laptop, your financial data is safe
• You can view your financial data anytime, anywhere as long as you have an internet connection and device

Keeping track of your cash 

Whichever accounting system you decide to go with, a system will allow you to make better decisions based on what is happening in your business now and in the future.

It’s important to identify trends that can help you make decisions and, down the line, grow your business such as:

• Which products and services generate most of your revenue
• Which customers provide the bulk of your sales
• Where your money is going and the highest costs
• Who pays late and needs chasing
• Which products make the best profit margin

Understanding the cash trends of your business means you’re in a better position to improve your profit and can spot ways your business can improve.

Summary

As a start-up, your first task is to evaluate your business needs and figure out which is the best accounting system that allows you to see your cash position at a glance, keep accurate records for the IRS and one that helps keep track of, and spot cash trends.

Talking to your accountant is an important first step – they’ll have good advice about what system to use, and they’ll want to know it’s one that’s compatible with their own.