Ah, one of the worst jobs in a business. Unless of course you are an accountant. Record keeping is one of the most important parts of running a business and yet I myself put it off all the time. As a matter of fact I actually have at least 5 receipts sitting in front of me right now that should have been entered into my accounting package no less than a week ago, likely longer.
So why am I writing about something that I cannot possibly do correctly? Quite simply because its hard to do correctly and without at least attempting to do some type of record keeping you are going to be giving a lot of extra money to the government an various other groups without your knowledge.
If you are small, for instance 1 or just a few people it can be to your best interest to do most of your own bookkeeping. This is simply because a bookkeeper can be rather expensive and unless you are making major money its possible that not quite enough money is available to go around. If you are not good at all with numbers then you should find an accountant or bookkeeper. A bookkeeper will keep you up to date on expenses and accounts payable, etc. An accountant on the other hand usually manages taxes and government related work. Though if you are lucky you might find a reasonably priced accountant to do both.
So, now that you have decided to do your own books you will need to decide how. Since I do all my work on the computer I tend to do all my accounting on the computer as well. This is good because the computer does the math for you, and bad because you don’t have paper copies in case your computer crashes. So, always before anything else, make sure you are backing up your financial data regularly. I try to print onto paper most of my invoices and such to ensure I have yet another backup in addition to the digital backups.
An accounting program like Quickbooks seems to be the standard way for most small businesses to keep their books. Every business owner I know who has been involved in business for a while uses Quickbooks. At this point I do not, but I expect that that will change over time. So the question is, save money now by finding a cheaper or free accounting package, or save the time by entering all your information into Quickbooks now.
I personally use Microsoft Office Accounting Express. It is a free accounting package from MS that manages quite well for myself. The only problem I have had is managing taxes, I usually have to calculate it myself because the program doesn’t really understand all the different types of tax rules around. The other problem with a program other than Quickbooks is that your taxes will be harder to prepare so make sure you are aware of what you are deciding on before you buy.
I will continue in part 2 with what records to keep.