Accounting System.

Accounting System.

You will need a bookkeeping system. Any accounting system will do. Proper record keeping and review of the records is vital to the health of your business. Choose your method of record keeping, cash or accrual, and get it set up. You must do the required accounting work on a regular basis. If you will do this, you will find yourself making decisions based on the facts, with fewer errors. If you do not keep the books on a regular basis, you will find record keeping will drive you crazy.

Also see the section called IRS Reports & Accounting.

If you are new to accounting may I suggest you read a book like "simplified accounting" or "accounting for dummies". After you have operated your business for a few months, re-read that book and accounting will begin to make sense after about six months.

You might also consider starting out using an outside bookkeeping service. Your time is better spent working on growing your business. Bookkeeping services are easily found in the yellow pages and most CPA offices can recommend someone. You give them your expense receipts and check book once a month, along with your sales (income) and cost of goods sold numbers, and they return your profit and loss statement along with any paper work needed by the government entities. Cost is from $50 to $150 per month. You can wait until you get your first sale to start use their services.

You can also buy a simplified book keeping system - (see below) - at the local office supply store that works for simple businesses.

Cash basis accounting: In cash basis accounting you account for income when received and expenses when paid. As a general rule cash accounting is best for service type businesses and accrual for everyone else. The problem with cash accounting is that money owed you, and money you owe, is not accounted for until actually received or paid. This can give you a misleading picture of your business.

Accrual basis accounting: In Accrual basis accounting, you account for sales when sold, (invoiced or shipped), and expenses when occurred, (usually when you receive the invoice), not when you pay the invoice. All transactions have two entries, a debit and a credit. Total credits must equal total debits for the books to balance. If you sell a product, stock inventory, or manufacture a product, accrual accounting is the more accurate and detailed method.

Talk to your accountant about which method is best for your business. The choice is yours. You will need IRS permission to change accounting methods once you start using one or the other. The following bookkeeping record books are available at most office supply stores nation wide. I used them thirty years ago and they are still a valuable resource today. The books cost about $12.00 each.

Dome SIMPLIFIED BOOKKEEPING RECORD system
specially designed by a C.P.A.

600 - DOP - (UPC: 0 78509 00601) Weekly bookkeeping record book
11'' x 9''

612 - DOP - (UPC: 0 78509 00613) Monthly bookkeeping record book
11.25'' x 9.25''

http://www.missouribusiness.netÂ

This state asso. has good info for small businesses. Do a search for "financial controls" for a sensible explanation on P&L statements and balance sheets.
http://www.onlinewbc.gov/

See the SBA web site for more information on cash flow and other finance related subjects.