Small Business Accounting System Setup
 Many entrepreneurs consider accounting a necessary evil forced onto them by the government. Small business owners often fear getting trapped in a mire of paperwork and spending hours pushing numbers around.
Accounting is an essential part of the business, and evil or not, it's something that can't be avoided. The accounting system is how a business tracks revenues and expenditures to establish if the company is financially successful.
It is the record keeping function used to determine taxes owed. It is also an information system that should be embraced by entrepreneurs as a means of providing a "state of the business" status report. Reports such as a balance sheets, and income statements, help you make informative business decisions.
Side Note: Insider's Guide To Your Own Virtual Bookkeeping Business
In The Beginning
There are different approaches that can be taken to set up an accounting system.
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Do your own bookkeeping and let an accountant prepare statements and tax filings
- Hire an accountant to work part time or full time to do both bookkeeping and statements
- Let a bookkeeping service maintain records and input data into software programs and have an accountant prepare the statements
- Subcontract only one portion of the accounting system such as payroll while records are maintained in the business and an accountant prepares the statements
- Assemble your own supporting records but let a bookkeeping/accounting service do the actual data input and have an accountant prepare statements
This is not a complete list but is intended to only give an idea of the various arrangements that can be established. The fact is most new small business owners do their own bookkeeping. They let an accountant prepare financial and tax statements. 
If you anticipate using the statements to obtain loans then you might even pay for the preparation of audited financial statements.
One of the main reasons business owners maintain their own bookkeeping systems is precisely because they need to know every day where the business stands financially.
There is no better way to:
- Keep a handle on the financial condition of the business
- Identify and resolve problems that arise
- Control expenses
- Evaluate profitability
- Establish a budget
- Assure accurate record keeping
- Manage accounting fees and expenses
The business owner is the one ultimately responsible to banks, lenders, and the government for the accuracy of the records. It would be nice if every small business could afford to hire an accountant to do all the work, however it is often too expensive for a small business.
Some business owners with payroll, have a payroll service or an accountant take care of it for them because there are payroll taxes and complex tax reporting statements involved. Accurate tracking of the payroll is critical and it is also a job function that must be on time to ensure your employees get paid on time and all necessary deductions are subtracted and submitted to the proper departments.
Almost all bookkeeping software programs will have a payroll module if you decide to prepare the payroll in-house.
Accounting Software
You will notice that at some point you will need an accountant unless you happen to be a CPA starting a new accounting business. That is why an accountant should be included on the business team before the company is even up and running. However you will most likely be doing most of the actual bookkeeping.
Not so long ago small businesses used manual bookkeeping systems and made handwritten general ledger and subsidiary entries in ledger books. But in the world of the personal computer that is no longer necessary and not advisable. Even the smallest new business can take advantage of the bookkeeping and accounting software available. The software systems today offer a lot of information and services needed to properly manage a business no matter how small it may be.
- Subsidiary ledgers for tracking specific revenues and expenditures
- General ledger summary accounts
- Payroll
- Checking details
- Bank account reconciliation
- Sales figures
- Loan tracking
- Purchasing
- Shipping and inventory systems
- Asset tracking
- Financial statements (monthly and annual)
- Income tax reporting
- Special reports as needed such as revenue or expense trend
The Right Package
There are accounting packages for small businesses sold that are affordable, easy to use, and comprehensive. Following are a few of the most popular programs.
There are others as well, though these are products that are well tested and able to be integrated with other products such as Excel. In addition, you need to consult carefully with your accountant and look ahead to the days when your small business will grow to the point where you will need more sophisticated add-ons.
Many of the most popular small business accounting packages can be easily expanded to integrate additional functions. For example, you can add a point of sale system that will automatically feed sales figures to the subsidiary and general ledger functions. You may decide you need a product inventory system that includes order and shipping features.
Integrating Your Online and Offline Accounting Needs
There is also another consideration. If you are selling through a website and accepting payments online then you will probably want to be able to easily feed the information into your accounting system. This can be accomplished in numerous ways.
- Manual posting of data into the accounting system from vendor supplied reports
- Automatic feed of sales revenue into accounting system
- Ability to download reports online, that can then be imported into your accounting system
In all cases, you need to consult with your accountant. The ideal accounting software choice is one that is compatible with your accountant's system. You don't want to create a whole set of accounting records that must be re-entered into the accountant's system to be useful for tax reporting, trend analysis or financial statement preparation.
Keeping It Relevant
A good accounting system should have certain qualities in order to be most useful to the small business owner.
- Software should be relevant to the business, i.e. offers cost accounting for a manufacturing firm
- Software should produce accurate information
- Accounting system should be user-friendly
- Accounting system should produce everything needed for preparation of accurate tax statements
Most accounting software is either web based or relies on internet access for updates and access to tutorials. If you are not computer literate, it is still advisable to use computerized software. There are many learning tools available today and all programs come with tutorials. You can take a class or attend one of the vendor sponsored seminars.
There are two main points to keep in mind when it comes to small business accounting.
- Use an automated bookkeeping and accounting system
- Choose the system after consultation with your accountant
Accounting Software:
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Related Resources From A Touch of Business:
Bookkeeping Basics
5 Important Keys to Starting a Small Business
Related Resources From The Web:
Small Business Tax and Accounting
Bean Counter's Tips For Small Business
Accounting Basics for Small Businesses
Accounting Tips For You
Video:
The Basic Accounting Equation
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