Basic Accounting Tips for Business Owners

When you are starting a new business or even if you just want to keep track of your personal accounting details, one of the first things you need to do is figure out the accounting system that fits you. There are two different accounting systems:

1. Cash-based accounting: The cash-based accounting method counts income at the time you receive it as well as expenses as you pay them.
   
   
2. Accrual accounting: The accrual accounting method will count the expenses and income at the time they happen but not when you actually pay or receive them.

No matter which method you decide fits your needs, you will want to keep your records up-to-date and accurate. Here are a few tips to help keep track of your finances:

• Computer Software. Having the correct computer software is crucial for a small business. The right software will make it much easier to track income, expenses, prepare tax documents when needed, and give summary reports of your business financial activity. It’s also important to back up your files either on a flash drive or in a cloud to ensure that if you get a computer virus or your computer crashes, you still have your records.

• Daily record keeping. It’s important to maintain your daily records. This basic rule will help you keep accurate records. It only takes a few minutes each day and you will be less likely to forget to enter any daily transactions.

• Checks. You should always review any checks you write for accuracy as well as any canceled checks. This action will help to prevent fraudulent or unauthorized checks. When the checks are for a business and you have a partner, you might consider the idea of having your partner co-sign the checks.

• Online transactions. Do you pay bills or receive payments online? Be sure to keep track of transaction confirmation numbers. This will come in handy if there is ever an issue concerning any of your transactions.

• Bank statements. This is a good way to balance the books by reconciling your accounts to track your expenses and income.

• Organization. Organize your records, such as invoices and checks, in numerical order so that if necessary, you can quickly find your records or any financial activity in your business.

• Business and personal funds. Always keep any business and personal funds and records separate. This tip will come in handy if you are ever audited by the IRS or need an audit for your business.

Depending on the size of your business, some companies find that it’s more cost effective to outsource their bookkeeping needs. At Summit CPA we offer multiple resources to keep your business on the right track. For more information, contact our office at (260) 497-9761 to schedule an appointment with our advisors.