While it is possible to manage your business accounting in a manual accounting system, you’d be much better served using an accounting software application.

Most entry-level applications on the market today are designed for people just like you: business owners with limited knowledge of bookkeeping and accounting basics. They’re also designed to make tracking financial transactions easy, and most are affordably priced for even the tiniest budget.

If you’re not sure whether something needs to be tracked, err on the side of caution and assume that it does. In all cases, the following financial items need to be properly managed.

“If you’re not sure whether something needs to be tracked, err on the side of caution and assume that it does. In all cases, the following financial items need to be properly managed.” 

1. Bank statements

With the advent of online banking, bulky bank statements are a thing of the past. However, reconciling your bank account is still important. Reconciling your statements each month allows you to balance your general ledger balance to your bank balance, account for any bank fees, and find any possible banking errors that may go unnoticed if the statements are not reconciled monthly.

2. Credit card statements

It’s just as important to reconcile your credit card statements as it is your bank statement. Credit card fraud is a real thing and can sneak up on you with a lot of small charges put through to see if you’re paying attention. Be sure you have a backup for every charge on your credit card statement. This is particularly important if you have a company credit card that is used by multiple employees.

3. Payroll

If you don’t have any employees yet, you don’t have to worry about payroll. However, if you have even one employee, you’ll need to properly track payroll. This includes everything from managing employee personnel records to retaining employee time records. This also means you need to manage all related payroll forms including 941s as well as W-2s and 1099s.

If you have employees, you’ll need to process and retain a copy of their W-2 forms. Source: TurboTax.com.

The best way to manage payroll is to subscribe to a payroll service that does most of the work for you. But even if you do it yourself, you’re still responsible for maintaining payroll records properly.

4. Invoices

One of the first things you should learn how to do is create an invoice. After all, how long will you stay in business if your customers aren’t invoiced for the products and services that you provide?

Again, any accounting software application you purchase will have an invoicing component included, which means accounts receivable tracking as well. If you want to get paid, be sure that you’re regularly invoicing and following up on those invoices.

5. Proof of payment

Your supplier calls to let you know that they won’t be shipping any products until you pay your bill. The problem is you mailed them a check three weeks ago. While you may not keep physical checks anymore, be sure that you keep your bank statements handy so you can determine if a check has cleared and, if so, request a copy of the check to give your supplier.

If you’re not using checks, keep proof of your payment together with the bill if the payment goes missing.

When making a payment electronically through PayPal, you’ll receive a receipt that should be attached to the original bill. Source: kerryathompson.com.

6. Startup costs

If your business is brand-new, make sure to track all of your startup expenses because, according to the IRS, you may be able to deduct up to $5,000 in startup and organizational costs in the year that your business becomes operational. Any costs exceeding the deduction will need to be amortized.

7. Payments received

Anytime a customer pays you is a reason to celebrate. Make sure that payments received from your customers are adequately tracked, whether they pay by check, cash, credit card, PayPal, or via ACH transfer. Whenever a customer pays, a record of that payment should be attached to their invoice and filed. If you’re ahead of the curve and using a paperless office, just save a record of the payment to their file.

8. Bills

As a new business, you must establish good credit with your vendors from the start. That means paying your bills when they’re due. But be sure to examine each bill that comes in to make sure that it’s accurate. It’s easier than you may think to pay an incorrect bill, so don’t let that happen.

After entering your bills in accounts payable, track them weekly to make sure that they’re paid on time. If they’re not, you’ll likely have to pay late fees, interest charges, or both.

You’ll also want to keep track of those smaller expenses such as parking fees, postage, printing, and mileage. Tracking business expenses properly will make sure that your year-end deductions are accurate and that you have the documentation to prove it.

9. Tax returns

If you’re a brand-new business, chances are you don’t have any tax returns yet. However, once you do, those returns must be filed away and kept for at least three years, although it may be a good idea to keep them longer.

10. Financial statements

You should be printing a set of financial statements monthly or quarterly, depending on your business. Using accounting software, running financial statements takes less than a minute, but the details in those reports can tell you a lot about your business.

If you maintain month-end closing financial statements, your bank reconciliation should be included with the financial statements to make sure that your general ledger balance and bank balance match.

A balance sheet is one of several financial statements that you should run monthly. Source: FreshBooks.

Source: https://www.fool.com/the-blueprint/startup-accounting/