How to Set a Robust Bookkeeping System for Your Business
When it comes to running a business and maintaining its financial health, proper accounting and bookkeeping are paramount. While bookkeeping is responsible for recording all financial transactions, accounting involves reporting, interpreting, classifying, analysing, and summarising this recorded financial data and information. This makes the former more transactional while the latter more subjective. If you want to make sound business decisions through proper accounting, complete and accurate recording of financial transactions is a must. That's how vital bookkeeping is!
In this article, we will share our guide on how to set a robust bookkeeping system for your business:
1. Decide on the accounting system for your business
The first step is to decide on how your bookkeeping can impact your accounting. This typically involves determining how your financial transactions will be recorded. In the past, business accountants would resort to manually track financial data and even use Excel sheets for manual recording. Today, thanks to technological advancements, you can use accounting tools to make your bookkeeping processes easier, more efficient, and automated. As such, sit down with your bookkeeper or accountant to see what particular accounting software to use.
2. Switch from cash to accrual accounting
As a business owner, you have the option to choose between cash and accrual accounting. While the former entails recording when cash exchanges hand, the latter involves recognising and recording revenues and expenses. When you first started your business, you may have used cash accounting. But as you plan to grow and expand your small business, it's best to switch over from cash to accrual accounting. Ultimately, this bookkeeping approach will help you regulate the financial health of your business.
3. Separate your business account from your personal account
When you were pursuing a startup, you may have opened an account for your business, and likely mixed your personal with your business funds. When you run out of money for business expenditures, you might have used your own money to ensure continuous business operation. Likewise, you may have used your business profits for your personal gains. It’s best to separate the business account from a personal account because it will help streamline your recording keeping during tax season. That said, start by having a bookkeeping system in place!
4. Consider upgrading your bookkeeping system
If you already have a bookkeeping system in place, it's good to consider upgrading it as your financial transactions become rather complex over time. As mentioned above, there are various bookkeeping and accounting tools available in the market, so you must choose one that works for your business. Your ultimate goal is to ensure the accuracy and overall efficiency of your financial recording.
At this point, you now know how to set a reliable bookkeeping system in place. As outlined above, all it takes is to decide on the accounting system for your business, switch from cash to accrual accounting, separate your business from your personal account, and consider upgrading your bookkeeping system. With all these key steps, you can ensure an accurate and complete recording of all your financial data and information, leading to proper accounting and ensuring your business’s overall financial health!
Are you looking to set a robust bookkeeping system in place? Let our business accountant in Gold Coast assist you! We're an accounting firm that helps businesses reduce taxes and boost profit. If you need reliable bookkeeping services, get in touch with us today to see how we can help!