EA - How to Design the Best Accounting and Bookkeeping Systems for a New Startup

How to Design the Best Accounting and Bookkeeping Systems for a New Startup

New startup entrepreneurs often experience the same things in the beginning stages of their business efforts: a to-do list that is miles long, and unending tasks to get the business off the ground. Accounting and bookkeeping systems should be a priority, but these tasks often fall to the backburner as efforts are focused on other business-building efforts.

It isn’t easy to start a business, especially when you are carrying the responsibility of managing the finances, product development, customer acquisition, and more. Most small business owners don’t have formal training in accounting and bookkeeping, which is why it can be valuable to enlist the services of an expert team. Accounting services aren’t only needed for tax preparation and filing, but these services can be invaluable to help you track profit margins, expenses, and more.

The right financial reports for your business will empower you in making the decisions that will propel your company forward in the future.

Good Systems Help to Grow Your Business

Your ultimate goal is to help your company grow, which is why it makes sense to spend your time on activities such as product development and marketing. These efforts will bring in the cash flow that will keep the business running. But you need to make sure that you are looking at historical trends and evaluating the possibilities for the future. Accounting and bookkeeping systems are integral to this process.

Tracking financial activity ensures that you aren’t overlooking potential tax write-offs and deductions. At the same time, you can implement systems that support budgeting goals and control spending. Too often, profit margins slip through the cracks, which is why a business financial system is essential for your success.

The Difference Between Bookkeeping and Accounting Systems

People often use the terms “bookkeeping” and “accounting” as synonyms. But there are distinct differences between the scope of work and services available. Bookkeeping and accounting work hand-in-hand, but it is important that you understand the ways they differ. Here’s a quick overview of the differences:

  • Bookkeeping: A person or team offering bookkeeping services might have a certification and/or on the job training experience, but it isn’t required to have a degree in the industry. Bookkeepers are responsible for managing the day and day out transactions of the business. Usually, bookkeeping services do not include audits or tax return filing.
  • Accounting: On the other hand, accounting services are focused more on the strategic side of financial management. An accountant steps in to help with financial supervision, which may include tasks such as bank statement reconciliation, tax strategy, tax preparation, and more. An accountant uses the information provided by the bookkeeping team to be strategic in the financial growth and overall financial health of the company.

It is important to consider both account and bookkeeping systems. Bookkeeping entails the ongoing recordkeeping activities for your company. Good bookkeeping software can be used to track and categorize the day-to-day transactions. At the same time, accounting taps more into the strategic side of running a business, helping you see the best strategies to manage tax burden and help your company grow.

Steps for Setting Up and Implementing Financial Systems

Are you trying to decide where to start with the implementation of a financial system? Here are a few steps that should be followed to help you get started on the right foot:

  1. Choose and Setup Accounting Software: A good software program is key to reduce busywork and improve overall results of your financial system. Not only do you need to select the software you would like to use, but you also need to have systems in place for the ongoing management of the transactions that are moving through your account. Business bank accounts are connected, but accounting and bookkeeping services are still needed for data entry, reconciliation, and more. Accounting programs are designed with checks and balances in place that help to reduce errors and automate the processes as much as possible.
  2. Open a Business Bank Account: All of your personal and business transactions need to be kept separate, which is why it is smart to open a new bank account dedicated to your business. Not only do you need checking and savings accounts, but it can also be helpful to have a business line of credit and a business credit card. Make sure all business transactions are moving through these accounts without getting mixed up in your personal spending.
  3. Hire a Financial Pro: It can also be helpful to hire professional services for accounting and bookkeeping. You are already juggling many responsibilities for your startup. Adding more busywork to your schedule only increases your stress levels and makes it harder to keep up with everything. If you find it challenging to be consistent with these ongoing bookkeeping tasks, consider the benefits of bringing in an expert team to oversee the details.
  4. Stay Consistent with Financial Tracking: Keep in mind that setting up the financial system is just the first step. It won’t help you to have a bookkeeping or accounting system if you aren’t using the available tools. Even though automation is implemented to track the money moving through your account, you need to be consistent about reconciliations and reviewing the details. Your decisions can be based on the financial health of your company, but this information is only accurate if you are consistent about ensuring the accuracy of the recorded transactions.
  5. Look to the Future: It can be beneficial to evaluate upcoming costs and potential areas of growth in your business. When you are proactive with maintaining good accounting and bookkeeping systems, then you can turn your attention to the strategic element of helping your company grow. You can rest assured, knowing that financial reports are accurate. At the same time, you can anticipate expenses that are coming up to help you manage the way your money is being used.

The Benefits of Bookkeeping and Accounting Services

As you learn more about the available benefits for your company, it’s easy to see how accounting and bookkeeping services can be valuable to boost your success and set you up for future growth. A good system helps you with the separation of personal and business finances. It is important to have a clear distinction by using different accounts and financial systems.

Also, bookkeeping and accounting services help you avoid common financial errors. Not only are you tracking the way the money flows through your accounts, but the reconciliation processes help to catch potential mistakes and fraud in the early stages. Identifying these problems right away is essential so that you can implement steps to stop the issue before things progress.

The most important benefit that you will find that is that accounting and bookkeeping systems are effective in streamlining your tax strategies, helping you maximize tax deductions. It feels good knowing that you are prepared for the upcoming tax deadlines, with enough money set aside to pay the bills. There is no reason for you to spend your valuable time crunching the numbers. Your accounting team can handle these details and provide the reports that break down your tax burden each year.

DIY Accounting and Bookkeeping Mistakes

The most important thing that you should keep in mind is the potential for mistakes and errors when you attempt a DIY approach for setting up these systems. Too often, startups are looking for ways to save money, so they implement a DIY accounting system. The problem is that errors are occurring and the system isn’t structured correctly.

Even though it seems like a savings in the beginning, the long-term costs can add up and make it more expensive in the long run. When the accounting and bookkeeping systems have been set up incorrectly, it can be expensive when an experienced accounting team needs to step in to redo the work.

The most effective and efficient solution is to get started with an experienced accounting team from the beginning. The money spent on these services is truly an investment that will help your company avoid common mistakes. By side-stepping these common issues, you can save yourself both time and money in the future.

Instead of cutting corners by trying to save money on accounting and bookkeeping services, look for other areas where you can reduce your business expenses. In fact, a good accounting and bookkeeping team can help with your budgeting strategy. Often, business owners find that the tax savings and financial streamlining is well worth the investment that was paid for services from a professional accounting team.

Talk to the Accounting and Bookkeeping Pros

What questions do you have about setting up accounting and bookkeeping systems for your small business? If you are evaluating your options, then we invite you to contact our experienced team for assistance. At Easier Accounting, we specialize in small business solutions. We’d love to have a conversation to help you identify the way our services can support your startup and boost your long-term profitability: (888) 620-0770.

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