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NCET Biz Tips: Setting Up a Simple Accounting System for New Business Owners

By March 22, 2022March 23rd, 2022No Comments

NCET Biz Tips: Setting Up a Simple Accounting System for New Business Owners | Serving Northern Nevada
















Mary Gibson

By Mary Gibson

Tuesday, March 22, 2022

Once you’ve obtained your business license and permits, it’s time to create a simple and efficient accounting system.

Your first step is to open a business bank account so you can keep your personal money separate from your business money. It’s easier if you open a new account that you currently bank on, but be sure to take your personal and business credentials with you. Different banks have different rules and some will not create business accounts for new businesses. You may need to open an additional “personal” account which will then be used for business only.

Once you have a separate account, you can transfer personal funds to the business to cover your expenses until your business generates revenue. When you incur business expenses, make sure they are paid from the business account and not your personal account. Also, only pay business expenses from the business account.

Accounting uses numbers instead of words to tell a story. An accounting system begins to track and organize your cash inflows and outflows. We group the movement of your money into expenses and income based on similar categories. Then we combine them in some way to create reports.

There are several reasons for creating different types of reports. First, you’ll want to know if you’re making a profit. Second, you will see how to increase this profit by increasing your sales and/or reducing your expenses. Another necessary reason is for government agencies that need reports for licenses, forms, and taxes.

As your funds flow in and out of your bank account, keep documentation of transactions and use a few folders to group receipts and similar bills together. Think about groupings you could use to group similar costs together. You can use paper records or scan your receipts to keep the same information in digital format.

Documents you will want to keep will include receipts for (but not limited to):
• To rent
• Advertising
• Telephone
• Stationery
• Assurance
• Car
• Travel
• Licenses
• Business loans and IOUs from friends and family
• Credit card and bank account statement
• A list of money and/or equipment you loaned the business to get started

Invoices for the services you provide and for the items you have sold to your clients and customers

If you are a retail store or restaurant, you will keep your daily cash register tapes and daily batch receipts from processing your sales.

By organizing your expenses and income into categories, you can summarize them by month. The first summary report that owners learn to love is the profit and loss report, sometimes called the income statement.

It simply groups your earnings together, at the top of the report; and it summarizes the expenses together, under the incomes. You need to know how much “profit” you have earned each month – how much money is left from your income after paying your fees. In the end, you would add up all the months in order to have the total income and the total expenses for the year.

You can use spreadsheet software for this, which automatically adds the numbers for you. You can also use accounting software to make this recording faster and easier. There are several accounting software packages created for small businesses: QuickBooks, Xero, FreshBooks, Zoho Books and others.

You can also use a yellow notepad or plain white paper. Whatever you decide to use, keep it simple.

The idea of ​​a simple accounting system is that reports help you understand what is going on in your business. You’ll want feedback on changes you can make to your business to increase the money you make.

Marie Gibson, speaker, author, online educator and accounting solutions expert, works with busy business owners who need to KNOW their numbers and make SMART business decisions. If you would like Marie’s complete online program “Accounting Made Simple for Busy Business Owners” free, with no obligation, please visit https://smartprofitpro.thinkific.com/courses/AccountingMadeSimpleforBusyBusinessOwners and use this promo code: SimpleSolutions.
NCET is a member-supported non-profit organization that helps people explore business and technology. (www.NCET.org)

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