Your business records should be kept simple. If you keep your records in a format you can easily understand, you can use them for analyzing trends in your business and be able explain the figures if you are ever audited. Your books should be accurate and error free. The records should be error free, since they are used to calculate your taxes. Any mistake you make might have tax ramifications in the future.
The accounting books should only keep records that are relevant. Do not complicate the process by entering information that is not necessary to your operations. The information you are recording should be consistent so that you can analyze it for trends and so your accountant can easily use the information. To keep accurate records, you should set guidelines and abide by them. Your accounting books must be timely and up-to-date; it becomes very time consuming, and sometimes impossible, to attempt to update your accounting books at a later time.
It is now quite common for business owners to do their bookkeeping in-house by using accounting software. In fact, many individuals now use accounting software to record their personal expenses and use the software to create a household budget. Your business accounting software will guide you in entering accurate and relevant information into your books. In tax season, you can print out this information and give to your accountant who will prepare your taxes.
Accounting software consists of many modules, some of which you will not use. It is important that your accounting software be customized for your business; if it is not simplified and tailored to you needs, it will be harder for you to enter information. For instance, if your business is cash only, then you do not require receivables or payables modules. If you do not have employees, then you do not have a need for the payroll module. Your accountant or bookkeeper can customize you accounting software so it is easier to mange and has the relevant journal entries.
There are many different brands of accounting software on the market. The more popular ones are QuickBooks®, Peachtree®, and Microsoft® Money. Specialized accounting and management software may also be available for your industry. Although these custom solutions are usually more expensive, they are useful at helping you run your business efficiently. However, if you are a new, mainstream business, off-the-shelf accounting software should be adequate to meet your needs.
Note: Keep in mind that some of newer and more popular accounting programs are able to connect directly to your online bank account and download your transactions. The software can also print checks and invoices, which will reduce the paperwork in your office.