Setting up Accounting System for New Business
Friday November 30, 2018,
7 min Read
Now that you are considering starting a new business on your own, including having a sole business idea, designing a career that has the flexibility to grow with you, working toward financial independence and investing in yourself.
Now the real challenge begins as you quit your regular day job & become a business owner yourself, not knowing how that industry works. The most important part of starting your business is managing finance. You can’t proceed too far without establishing a simple & efficient accounting system that won’t get too complicated for you. The early stages are the time one needs to establish the structure that will support your company financially and help you define your financial strategy as you too grow.
It is very important that you manage your accounting properly for the growth of your business. However, it is not necessary to spend a fortune doing it. Rather you can invest it in your own business.
These are the basic that you must follow before you start your new business,
- Open a Business Bank Account
Opening a bank account that is separate from your personal account is very much necessary for accepting payments & paying your creditors. If you will have employees, a separate payroll account should be set up as well. This should be the account where you make payments and receive payments as well.
- Separate Personal & Business expenses
Avoid using the business account for personal use by establishing corporate checking & saving accounts. Maintain a separate income statement and balance sheet. Use checks from your business banking account or separate business credit or debit cards to pay for all of your business transaction.
- Keep records of receipts & invoices
Keeping a record of all your transaction can help you in the long run of your business. This will also come in handy when you have to pay to taxes. You can either keep their physical copies or store them on the cloud so that you can have their access from anywhere.
- Make a list of Items
Create a list of items and materials the company owns. This list will become your assets in the accounting system. For example, cash, office equipment, buildings, vehicles, and office supplies. Include the value of the assets when you make your list.
- Create a process for Payment Collection
Always have a process for payment collection so that you know from where and when you will be getting your money. Even keep records for new customers. Establish credits guideline and create a collection timeline so your clients know what is expected. Keep a simple process for payment collection, even for accepting payments through PayPal, or any other online payment.
Choose the right method of recording the transactions
Now that you have set up your business account, the question is how you maintain it effortlessly without investing much of your time. Now you have to choose how you would like to record your transactions. You can record the transaction on your own, hire an accountant or use accounting software.
- Though recording your own transaction would be the cheapest solution for you but it will take a large chunk of time out of your daily work. Recording transaction and making calculation will take too much of your time. And you may make errors while bookkeeping.
- If you hire an accountant, you need not to worry about managing your books yourself. The accountant will take care of financial complexity. But, always keep in mind that hiring an accountant can get expensive for your business.
- The best alternative is using an Accounting Software. You can record your business transaction yourself without needing an accountant. The software will automate your accounting process giving you streamlined book and accurate calculations.
Setup your Charts of Accounts.
After choosing the method for recording transaction, it’s time to set up your chart of accounts. A chart of accounts is simply a list of accounts that you will be using in your business such as revenue, cash, accounts receivable, accounts payable, payroll, supplies, rent, utilities, etc.
Choose the right Accounting Software for your Business.
Now that you are clear which way you want to proceed with, choosing the right accounting softwaredepending on the requirement of your business.
Make a list of crucial features that you absolutely need in your business’s accounting software. Here are some of the features which must be part of a good accounting package,
- Create and customize invoices
- Track expenses according to categories
- Manage inventory
- POS mode billing
- Income & expense management
- E-way bill
- Bank integration & reconciliation
- GST Reports
- Bank Reconciliation
- Multi-user login
- Manage a list of customers & vendors
- View account payables & receivables
- View Balance Sheet, Profit & Loss statement and Trial Balance reports
As you will face multiple setbacks in offline accounting software, so it is better to use online accounting software.
Understanding the Requirement for your Business.
- If the software is bloated with every possible feature you can imagine, it will become difficult to use for you & your team. So, go for software which has a simple user interface and is not overstuffed with unnecessary features. The clean interface makes it easy to focus on the important tasks and can reduce the learning curve.
- As you are starting a new business so your requirements are of small businesses, so choose a software that can help your small business grow. But, it is also better to select an accounting software which can scale with your business needs.
- The major concern of all business is the safety of their data. If your accounting software provider is hosting the application on their own servers, ask them about the security measures they are taking to safeguard your data.
- No matter how good or user friendly the software is, you will need support at some point. And if you have nobody to talk to when you are stuck, your entire investment will go in vain. So before buying always inquire what kind of support you will be provided when you are in doubt.
Budget & Prices
Most of the software provides free trial for a short period of time and then the service becomes paid. So the best suggestion is, do a little research & make a list of some accounting software which you consider is good. Signup with all of them and spend a little time experimenting with all of them. Find the software that you are most comfortable with.
Always have a clear discussion with the company about the actual cost of product & any future costs before upgrading from the free trial. This will be helpful for your business to avoid any hidden cost burden. Make a comparison of the pricing of different accounting software. Invest in the accounting software that you think will take your business to next level.
Always keep in mind, that it will be very difficult for you migrating to different software once you have started and invested so much of your time and money on accounting software. Finding the right software is not easy, take your time but try and make a quick decision. It’s always better to spend more time before the purchase to save frustration a later stage.
Looking for the best accounting software for your business, start here. Checkout our free trial.