If you’re just starting the journey toward owning your own small business, congratulations! Perhaps you’re in the process of putting all the pieces of the puzzle together so you can be ready to launch. One of the most important pieces requires setting up your bookkeeping system so your business operates with a clear understanding of its finances. For most entrepreneurs, bookkeeping is an overwhelming task when faced with all the other demands of owning a business. Hiring a virtual bookkeeper will provide you with the peace of mind and extra time you need to thrive, all for a fraction of the cost you’d pay an accountant or full-time bookkeeper!
Here are a few of the first steps to take when establishing a healthy bookkeeping system for your business. Keep in mind, you don’t have to do this alone! A remote bookkeeper will happily assist you and your business create a strong financial foundation your company can build upon.
Step One: Open a business checking account.
Now that you’ve legally registered your business, you’ll want to open a business checking account. For tax purposes, it’s best to keep your business separate from your personal finances. This separation keeps your records easier to track, and you and your accountant will be grateful for the feasibility when it comes time to file taxes. This also protects your personal assets in the unfortunate event of bankruptcy or other similar circumstances. Before you go to your nearest bank to open an account, do your research! Banks vary in their fee structures. Find one that is best for your unique situation. Start with a checking account; worry about a savings account or line of credit later.
Step Two: Decide on a bookkeeping method to maintain your financial records.
Bookkeeping is NOT something you want to neglect or “save for later”. Research the available accounting softwares and determine which is best for you. Quickbooks is most widely used and allows you to store your records in the cloud so a virtual bookkeeper and accountant can access them too. However, there are several available cloud-based options on the market. Once you’ve decided which you’d like to use, register for an account. Most charge a monthly fee, so understand the price differences before you get started.
You can also go the DIY route and use an Excel spreadsheet. The benefit of this is that it’s free! However, this route also presents a number of challenges and requires more work than using an automated bookkeeping system.
Step Three: Record every transaction.
Once you have your chosen bookkeeping method in place, you’ll need to begin recording your transactions in your general ledger. Your general ledger will have various categories, or accounts, your transactions will fall under. These categories are called a “chart of accounts.” Understanding the differences between these accounts is important because you’ll need to know where to place each transaction you make, and not every chart of accounts is going to look the same. Ask your accountant or bookkeeper for a recommended chart of accounts before you begin recording transactions so you’re both on the same page. Once your ledger is set, record every financial transaction – big or small – your business makes, so you can be certain where your money is going.
Step Four: Balance the Ledger.
This important step involves checking your bank statements against your recorded financial transactions to make sure they align. If your ledger doesn’t match your bank statements down to the penny, you’ll have to find out where the mistake is being made. Oftentimes, bank fees or deposits show up in a bank statement, but not on a general ledger. It’s wise to balance the ledger often so you’re able to catch any mistakes before they become problems.
Step Five: Run Reports.
Once you’ve gotten into a steady routine of recording transactions and balancing your ledger, you’ll be able to run important financial reports that provide great insight into the health of your business. When properly analyzed, these reports will help you steer your business in a profitable direction. However, for reports to be helpful they must be accurate, and accuracy comes from seamless bookkeeping.
How to Hire a Remote Bookkeeper
These bookkeeping tasks can seem tedious, overwhelming and at times very confusing, especially on top of the never-ending list of responsibilities every business owner has. However, a smart owner knows this aspect of a business cannot be neglected. More and more business owners are realizing the many benefits of virtual bookkeeping services every day; if you’re one of them, consider reaching out to us today to talk about how we can assist you. At remote bookkeeping companies like Coastal Bookkeeping and Mobile Notary Services, we are here to provide you with secure, honest and reliable remote bookkeeping services… so you can focus on achieving your maximum business success.