For start-ups, managing business accounting can be intimidating and seemingly daunting. Furthermore, some of the most fundamental elements of accounting, for instance bookkeeping can get complex. Bookkeeping involves the recording of every financial transaction, including financial records of sales, purchases, and payments.
The objective of this practice is to record a company’s financial records in a comprehensive manner that offers valuable information. Therefore, it’s imperative that start-ups track these essential items for efficiency.
1. Accounts Payable
Accounts payable signify money you owe to your vendors and suppliers for services and products you didn’t pay for entirely upfront. Good bookkeeping ensures you make timely payments and prevents you from paying anybody twice.
The failure to manage this item properly can result in penalties, severed supplier relations, and possible business failure that you could have avoided if you had foreseen and managed cash flow problems. Bear in mind that the precision and completeness of a business’s financial statements are reliant on the accounts payable.
The efficiency of this process will also affect your business’s cash position and credit rating. Implementing a dependable system will generate precise financial information you require to plan for long and short term.
Numerous small businesses track accounts payable or A/P on a monthly basis. However, as your business grows, it’s better to do it weekly to maximize discounts. Remember, working with A/P needs considerable attention to detail and you must verify every invoice for accuracy.
Inventory is an asset on your balance sheet that start-ups must track and account for carefully. Proper inventory management is necessary because it helps you understand cash flow. Inventory might be the ready-to-sell or raw-goods. Physical inventory count should occur periodically to ensure the accounting records match the real inventory on hand.
Bear in mind that allocating and tracking portions of inventory can be extremely complex. Take note of variances between accounting and actual inventory, which can arise from imprecise tracking.
3. Accounts Receivable
Not every business will have this item, so it’s applicable to businesses that sell services or products before collecting payment or a segment of the payment during a sale. Businesses use accounts receivable to establish credit or provide clients long-term payment plans.
Proper maintenance of this item can provide numerous benefits to businesses of varying sizes. For instance, it can track client credit and build client loyalty. Tracking it is essential to ensure you send accurate and timely invoices or bills.
It’s important you reconcile your receivables with their equivalent invoices as soon as you obtain payment. This will allow you to track the paid and unpaid receivables. Make sure you watch for any inconsistencies to ensure errors don’t exist.
Most business transactions go through this account. You can divide the transactions between cash disbursement and cash receipts. This is the most basic account and it reveals the exact amount of cash you have in the bank. At the end of every month, you must reconcile the bank account for any errors or outstanding transactions.
5. Payroll Expenses
For numerous companies, this is the biggest expense. The accounts include employee salaries and benefits. Maintaining accuracy and tracking the item is necessary to meet tax and other government reporting prerequisites.
It will also help you understand personnel expenses. Keep in mind that inaccurate tracking could cost you thousands in payroll taxes and added wages every month.
Furthermore, if your system has a weakness, it could affect paycheck precision while inaccuracy may result in consequences besides paycheck errors. For optimum results, hire a knowledgeable and dependable staff and use software to process payroll taxes and paychecks.
6. Loans Payable
If you borrow cash to purchase equipment, this account tracks what’s due and what you owe.
Bookkeeping is one of the most important tasks for any business regardless of its size or industry. Unfortunately, it’s also one of the most overlooked, forcing a number of companies out of the market. Fortunately, this guide reveals the essential items that all start-ups must track.
Dailey Bookkeeping Services is a Xero Certified SILVER Partner and a QuickBooks Online Certified Advisor, so if we can help you with your start-up needs, just give us a call, we would love to help you! The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Silver Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can! Feel free to visit our website at http://www.