Ten Part Series on Starting a Business - Part 8

Bookkeeping, Budgeting, Accounting, and Finances

New business owners will have varying skills with regards to accounting, bookkeeping, budgeting and finances, but will likely require help at some level to make sure the business is keeping appropriate records and correctly tracking income and expenses.  Today’s software makes this easier than ever, but it is vital for the business owner(s) to have at least a basic understanding of accounting principles, even if they have someone else keeping the books.  Taking a class or two will be well worth the time and expense when it comes time to set up your books and organizational system, and when preparing to provide your accountant with what they need to prepare your taxes (or to prepare them yourself).

There are no particular rules for how you organize your financial records, but the more organized you are:

·        the more easily you will be able to find what you need when you need it

·        the more likely you will know where your business stands financially

·        the easier (and less expensive) it will be for your accountant to prepare your taxes, including finding all applicable deductions

·        the easier it will be if you are audited

Be sure to:

·        Keep receipts or proof of all expenses

·        Keep track of all income

·        Decide which accounting method you will use (cash or accrual), and make sure all entries are recorded according to that method

·        Record everything in a timely manner

Also, become reasonably knowledgeable with the following terms and processes:

Accounting

Bookkeeping

Invoices vs. Statements

Receipts

Accounts Payable

Accounts Receivable

Taxable vs. Non-taxable Sales

Profit and Loss Statement

Balance Sheet

Cash Flow

Accounting and finances do not have to be daunting, but it does pay to do your homework and keep careful records.

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Kim Luedke is Co-owner of ProfessionalEdge Associates, offering a wide range of marketing and support services to businesses that want to increase their success, but aren't in a position to add to their staff.