Setting up your software for the first time
Your software program will walk you step by step through the setup process for your company. But here are some general tips and things you need to have on hand and decisions you need to have made when you set this up.
• Beginning bank accounts balances to enter
What are all the bank accounts that the business has and what will be the “opening balance” you’ll enter for each+
• Accounting method -- cash or accrual
In the cash method, a transaction is dated when money is actually paid or received. In the cash method, transactions are dated when the commitment to pay or be paid is made, although money won’t change hands immediately. Check with your accountant to confirm which method your company should go with.
• What categories will be in your “chart of accounts”
This is just your list of different types of transactions you want to track, plus your different asset accounts, such as bank accounts, plus others.
More on Chart of Accounts
Tax Center / Startup / Chart of Accounts
Tips about accounting software
Whenever you issue checks, stick consistently with the same method. Either enter all your checks in accounts payable first, or never use accounts payable. Switching methods invites problems that you don’t want to spend time dealing with.
Save backups off your hard drive often
Your accounting program automatically saves each entry as you make it, but it is super important for you to frequently save a current backup copy of your file OFF your computer and in a different location. You don’t want to put it off “just this time” and be sorry when your hard drive suddenly goes looney and mysteriously loses all your accounting data.
Make changes early in your year
If you are going to start or change systems or set up a new company, try to do so at the beginning of your business year so you can avoid the hassle of duplicate bookkeeping. Most likely your business year will be in sync with the calendar year, starting with January 1.
There used to be more reasons for companies to choose a different start date for their year, but now most small firms can stick with the simplicity of January through December as their business year. Your accountant will advise you on this. If you have no reason to choose otherwise, go with the calendar year.
Maintain your accounting records
The frequency and number of transactions -- money coming in and money going out -- determines how often your company’s accounting file needs to be updated and by what method.
Companies who have orders coming in every hour, such as from online sales, will want to get new data in as close to real time as possible, perhaps via automatic online entry.
But many small businesses that don’t have a huge quantity of transactions going in or coming out will do just fine with bi-weekly updating. It would be nice to be able to say once a month is adequate, but with the different timing of bills, plus the importance of keeping on top of your cash flow situation, updating just once monthly could court danger.
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