Starting a new business and getting it off the ground can be an exciting venture, but with it, of course, comes a certain amount of additional responsibility. One of the most crucial steps for starting a new business is the setting up of a bookkeeping system. A good system of bookkeeping will help one keep pace with what is earned, expenses incurred, and how a business is doing regarding finances. It also helps in preparing someone for tax time well ahead of time and making wise decisions regarding the future of the business. As the work has to be carried out with perfection and a very close look can be done either through a system of own or through some outsourced bookkeeping service, due to this reason. You will be guided through the steps of the bookkeeping setting process that your new business will be required to follow.

1. What Are the Essentials of Setting Up a Bookkeeping System?

Identify Your Business Needs

Identify what you need for a bookkeeping system. Is your business in need of a record review for supplies, sorting out concerns regarding payroll, or merely monitoring and recording business spending? Knowing what you particularly need leads you to the right choice of bookkeeping service.

Choose Between Cash vs. Accrual Accounting

To get started, first determine the type of accounting you are going to use; cash or accrual. Cash basis accounting is when income and expenses are reported from when money is received and when paid. Accrual basis does not necessarily mean that income and expenses are paid, but rather when they are incurred. Most small businesses find cash accounting straightforward. Big companies typically prefer to use accrual accounting.

Select the Right Software

Choose an online bookkeeping service or software that is right for your business. Digital bookkeeping services may vary since, like every business, they are different according to size and needs. Most of these virtual bookkeeping services have very strong features with the small business in mind. QuickBooks, Xero, and FreshBooks are some of the popular ones.

Create a Chart of Accounts

An account chart is a listing of all the accounts your business will use to track and record financial activities. It serves as the basis for your bookkeeping system. Make sure it is complete and free from any omissions, and that it is well organized to account for all your business transactions.

Opening Business Bank Accounts

You should keep personal and business finances separate: open a business bank account, and apply for a business credit card, to keep clean records of all your finances, which will help in running bookkeeping services and knowing where your business is at any given time.

Record Keeping System

Whether you are into paper records or digital records, the rule of the day is being consistent. Design a system for capturing all the receipts, invoices, and other financial documents. Online bookkeeping services have many tools that can help you automate and organize this process.

2. How Do You Keep an Optimized Bookkeeping System?

Regular Reconciliation

Account reconciliation is the process in accounting that involves bringing the accounts up to date and then subjecting the account entries to the bank statements to compare and find variances. In this way, you will be in a position to post your financial data in time because you will point out the variances within the scenarios. This can be done manually or it can be done online through a book-keeping service where reconciliation can be done automatically.

Keep every single income and expense in your bookkeeping system, strictly accounted for. It is the categorization of transactions that allows you to see exactly where money is acquired and where it goes. Most small business bookkeeping services tools do this automatically, so it saves a lot of time with the detail work and cons errors.

Establish regular statements for the balance sheet, income statement, and cash flow statement. These three documents give you an almost definitive view of how your business is faring on the financial front. Most virtual bookkeeping services will at the very least provide templates in this regard, with some even creating these reports automatically.

Cash flow is the artery of any business, the continuous lifeblood flowing through. The business always needs to have due regard to flowing—that is, cash flow—and stay in a position where inflows into the business look to cover the expenses and, hopefully, be put back into the business for investment. If the cash gets too tight, you will need to have your spending adjusted or search for some extra revenue.

Review and Adjust

Your bookkeeping system should evolve with your business. Periodically, take stock of your system and make changes where necessary if your business grows or your needs change. Outsourced bookkeeping services could give you invaluable inputs to assist decision-making.

3. Should You Outsource Your Bookkeeping?

Benefits of Outsourcing

This also buys you time while getting you expertise that might be lacking in-house. In outsourcing, bookkeeping services are provided by professionals who are equally manned with bookkeeping skills, and are good at managing books, ensuring compliance, and giving strategic financial advice; hence, this will work out just fine. That means there is value for money in the arrangement for a small business, which would have otherwise been in a better position had it had a full-time bookkeeper.

As much as outsourcing may be regarded as cheap, the costs must be weighed against the benefits. The cost of bookkeeping services in the USA is not fixed and as such one should look for a service that is pocket-friendly. One should look out for a flexible pricing service that charges for only what is done.

Picking a Service

Factors to be considered in choosing an online bookkeeping service are the provider's experience and reputation, and the needs of the business in question. Look for references, read reviews, and make sure the service decided upon really grasps your industry and business model.

Case Law: United States v. Boyle

A case in point is United States v. Boyle 469 U.S. 241, 1985, in which the U.S. According to the Supreme Court, even in working with an accountant, it is the taxpayer's role to make sure that the tax return is filed in good time. In the case at hand, the taxpayer cannot rely on an accountant to make sure that the return is filed on time. What overwhelmingly comes out of this case is that, indeed, it pays to have your hands and eyes on the books even if bookkeeping services are outsourced.

Conclusion: 

Why Is a Good Bookkeeping System Needed For Your Business?

Such performance translates into a solid bookkeeping system for a business you are involved in Setting up good bookkeeping will keep you in command of your money, keep you out of hot water with tax authorities, and present you with the right financial information needed to run your business. Make it a habit to be relentless. Keep up with things. Remember, financial health is the key plank to business growth and stability. By the investment of time in your bookkeeping system, you are investing in the future success of your business. Your bookkeeping, simplified—FINO PARTNER keeps your books balanced!