Simple Guide to Start an Accounting System

Posted by David Guerrero

Having an accounting system in place is crucial for any business, but most importantly for those just starting out. Any business that has been running for some months or years, and then starts establishing some type of system will tell you they wished they would have done it from the beginning. Keep in mind, without some type of system in place, you can not keep track of what you own, to whom you owe money to and who owes you money. 

 Creating an accounting system does not need to be an overly complicated task, as long as you know what you own and to whom you owe money, an accounting system can be set up with relative ease.

Start with a Bank Account

Open a bank account for the business. Every bank has different documentation requirements. They generally ask for the Articles of Incorporation, Tax ID for the business and your personal information to match those of your business' documents. A bank account is essential for accepting payments and paying your creditors. If you plan on having employees, a separate payroll account should be set up to keep your payables and receivables separate from your payroll.  You can also try Paychex Payroll Services for small business to keep things completely separate.  After you accept a payment in cash, and/or your credit card transactions clear the credit card company and you need to pay your employees, this account is where the money will be transferred to so your employees can cash their checks.

Keep track of your creditors (Liabilities)

Start a Liability account in your accounting system. This is basically a list of all your creditors. Make sure you include everyone to who you owe money to, from vendors, to mortgage companies, to banks and credit card companies.  Make sure you include the exact amount owed to each of your creditors. Never make the mistake of undermining cents. They do add up and will throw off your balance. Ensure every penny is accounted for. 

Keep track of your assets

The best time to start an inventory list is when you buy your first item for your business and the first dollar goes in your bank account. These will become your assets in your accounting system. Ensure you include cash, office equipment, buildings, vehicles and office supplies. Include the value of the assets when you make your list and not what you paid for it. Keep in mind; items depreciate over time, so revise your list to make sure you are not over valuing your physical assets...

Make things Automatic

Accounting can get tricky once you start having a high volume of transactions coming in and out. Choose a computerized accounting system that will allow you to automatically downloads transactions from your bank account and manually enter transactions will be your best choice. You can choose from many accounting systems, including Outright which automatically categorize your transactions, or go for your typical Peachtree, Quicken and QuickBooks. Choose the accounting system that works best for your business. Keep in mind that each computerized accounting system requires a certain level of experience. Peachtree is for users with at least a familiarity with accounting and QuickBooks can be used by someone with limited or no accounting experience.

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