If you are planning to set up a new business, it is important to create an effective bookkeeping system. Many assume that bookkeeping is a time taking process that involves a large amount of work. It is vital to give thought to maintaining records of the everyday business transactions in the beginning stages. You can contact Accountant Coorparoo to maintain a sound bookkeeping system. It is vital to establish a systematic bookkeeping system as it will help your organisation flourish.
Here are four vital steps that will help you create a sound bookkeeping system:
1. Decide on an accounting system
When you set up your business you need to determine how financial transactions should be recorded. You must create a customised system that works for your business. The latest computerised systems can bring down the time spent on bookkeeping and eliminate human errors. Bookkeeper Coorparoo will also help you with the decision on whether the business requires a single or double entry bookkeeping system. Additionally, records must be conveniently accessed in an organised manner. It is worth mentioning that a single entry system has emerged appropriate for small businesses. Meanwhile, in a double entry system, two entries are created for every transaction.
2. Create a chart of accounts
You also need to select between cash and accrual accounting. A sole trader or owner should select cash accounting. However, they may also shift to accrual accounting when they plans to expand his business. It is necessary to shift to accrual accounting if the business is able to produce over $5 million/year. Under cash accounting, the transaction will be recorded when cash will be exchanged between two parties. In the accrual system, an entry will get recorded when invoiced even though cash is paid at a later stage. In case you decide to provide credit to your customer, you must select an accrual accounting system.
3. Opt for a separate bank account
It is important to open a separate bank account as it will not interfere with the personal funds of the business owner. Also, it will ensure that you do not use your business funds for private expenditures. It will be immensely useful in monitoring the business expenditures when you file tax returns. When there is a separate account, it will eliminate all confusion and give you details about business related expenditures and income. You should talk to Business Improvement Coorparoo to create a robust bookkeeping system.
4. Create a system for invoicing and monitoring bills
If you receive late payments, it can cause a cash crunch situation for your company. Therefore, you must create a powerful invoice system that can produce invoices instantly and receive payments on time. You can also opt for the latest accounting software that will automate the invoice process. The software will let you scan the important paper bills and retain copies of them in the system.
Bookkeeping will require plenty of factual data collection along with assessment. Get in touch with Tax Agent Coorparoo to create an effective bookkeeping system. If you plan to set up a robust bookkeeping system in your company, you must ensure that you follow the aforementioned steps. It will help in building a powerful foundation for your company. It is also essential to analyse and upgrade the bookkeeping system amid changing requirements.