Accounting Basics Every Startup Needs to Track (Pt. 1)

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.”

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.

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.