Setting up the accounting processes

Setting up an accounting system is crucial for any small business owner. The first step is to understand your business’s needs. This includes assessing the size of your business, the number of transactions processed each month, and the type of financial reports required from your accounting system (e.g., income statement, balance sheet, cash flow statement). This evaluation will help determine the most suitable accounting system for your business.

Next, you must choose between single-entry (e.g. listing your income and expenses in a spreadsheet based on your bank transactions) and double-entry accounting methods. Single-entry is simpler and easier to maintain, but it may not be appropriate for businesses with a high volume of transactions or complex financial reporting needs. Double-entry is more comprehensive, recording each transaction twice—once as a debit and once as a credit—making it more accurate but also more time-consuming.

Once you have selected a method, decide whether to maintain records manually (e.g. in Excel) or use accounting software (e.g. Xero or Quickbooks). While manual systems may suffice for small businesses with few transactions, accounting software can save time by automating tasks such as data entry and reconciliation.

You will also need to create a chart of accounts, which is essentially a list of categories for recording different types of transactions. It’s vital to establish an organised system for storing all financial documents and transactions, which should be recorded regularly—daily, weekly, or monthly, depending on your business’s needs. Team up with Foundry Accounting and get your financial records in order!