Why Is Bookkeeping Important for Startups Business?

Home icon-arrow Blog icon-arrow How to Set Up A Bookkeeping System For Your Startup

Each business needs a bookkeeping system to keep accurate financial records. In the event that you don't have a finance background, building productive bookkeeping processes and accurately tracking the right data can appear to be an overwhelming task. Regardless of whether you're a first-time founder laying the basis for a startup or a small business proprietor attempting to reorganize your business' finances, this bookkeeping setup checklist will guide you through the steps to make a fundamental bookkeeping system.

9 Steps to Build a Startup Bookkeeping System

Every business' bookkeeping system should suit its extraordinary revenue model, the size of the group, and its plans for growth. To build a bookkeeping system that works for your startup, you'll need to settle on a few key decisions about the tools to utilize and the way to deal with take: This bookkeeping setup guide outlines the choices at each stage of building your system.

1. Pick between cash or accrual accounting methods.

Picking whether to utilize the cash or accrual accounting method builds up how and when your business will record transactions. Cash accounting records expenses and income when cash changes hands, while accrual accounting perceives revenue or expenses at the hour of conveyance of goods or services.

For small businesses that need a simple bookkeeping system and don't plan to scale, cash accounting services is a basic method for monitoring payments. Notwithstanding, for startups that expect to develop, it's a good idea to utilize accrual accounting from the very first moment. In case you intend to raise venture capital, investors will hope to see reports that reflect accrual and GAAP methods, and businesses with more than $5 million annual revenue are needed by the IRS to utilize accrual accounting. Accrual accounting likewise gives a more accurate image of the business's financial health and is the premise of appropriate financial modeling and projections.

2. Open a business bank account.

Separate the business cash from your personal funds by setting up separate bank accounts for business expenses. It's more straightforward to accurately monitor the business' transactions when you don't have to sort them from personal buys, deposits, or expenses—also, you can recognize potential business tax deductions and assist with smoothing out tax preparations.

While picking a bank account for your business, review every choice in light of these considerations:

• Banking fees

• Transaction limits

• Security level

• Online or mobile banking abilities

• Customer support

3. Set up accounting software.

A few founders have decided to figure out how to do manual bookkeeping, yet with the assortment of accessible bookkeeping software to deal with your accounts, this isn't required. It is feasible to handle your bookkeeping in a basic spreadsheet program like Excel in the event that you just cycle a modest bunch of journal entries, however, it's not difficult to make blunders with manual bookkeeping entries—and assuming the business develops bigger and more complicated, it will before long require long periods of work to cover the essentials.

On the other hand, you can utilize business accounting software like Quickbooks Online to automate numerous bookkeeping processes—including arranging expenses, generating invoices, and building reports—so your bookkeeping takes a fraction of the time. Since accounting software syncs every one of the data from bank accounts and credit cards onto one platform and offers reconciliations with other finance-related tools, you gain a full image of your finances without expecting to manually download the details from each account separately.

Whichever accounting software you pick, you should customize it to suit your business. This cycle incorporates first setting the software to utilize either cash or accrual premise accounting. Most accounting software programs incorporate an essential chart of accounts, yet you should set up a chart of accounts that is explicit to your business, including numbered business ledgers and classifications for revenue. Assuming your expenses are grouped into preset classes that don't reflect your operations, it can require a long time to organize the data and give accurate reports to board members and investors.

4. Connect a payment assortment system.

To make your business reasonable, you really want a way for customers to pay. You can begin tolerating online payments very quickly through payment gateways like Stripe or PayPal. These systems are natural to numerous customers and just charge a small expense for every payment you process. For a more comprehensive accounts receivable solution that acknowledges various payment types (like ACH transfers and wire transfers) and processes global payments, advanced billing solutions like Chargebee or Recurly handle each progression of the payment cycle from generating invoices to gathering customer details to sending receipts. Connect your billing system with your accounting software to automatically record these financial transactions.

5. Set up a payroll system.

Before you hire your first employee, you really want a system set up to pay them. Just as guaranteeing paychecks are right and opportune, employers are additionally needed to finish the accompanying payroll processes:

• Check documents that show employee authorization to work in the U.S.

• Calculate and withhold payroll taxes from employee paychecks

• Register the business for payroll tax in each state where your employees dwell

• File employment tax forms

Most businesses utilize either a payroll service or a professional employee organization (PEO) to assist them with dealing with these tasks. A payroll service supplier deals with all parts of payroll to guarantee employees are paid accurately and on schedule; a PEO gives more comprehensive HR solutions that incorporate payroll.

6. Start ordinary bank reconciliation.

Reconciliation is the method involved with matching the transactions on your bank statement to the transactions in the general ledger of your accounts. A few discrepancies between your bookkeeping and your banking may be the result of mistakes you would then be able to distinguish and resolve. Different discrepancies between these records may be the result of outstanding payments to or from your bank—for instance, a check you issued to a merchant they have not yet cashed would be recorded in your books however not debited from your account.

Businesses ought to finish a bank reconciliation one time each month, yet in the event that you have a mind-boggling banking setup or an enormous number of business transactions, consider reconciling your accounts each week or even each day.

7. Build key reports.

Financial reports show the business' group, investors, and board members how you're performing against startup metrics and goals and uncover trends in the data that assist you with settling on strategic business decisions. There are three financial statements that each business needs to generate as a feature of their bookkeeping interaction:

• The profit and loss statement (otherwise called the income statement or P&L) shows the business' financial presentation throughout some undefined time frame.

• The balance sheet shows a snapshot of the organization's finances at a specific point on schedule, including all assets (counting inventory) and liabilities.

• The cash flow statement shows how much the organization goes through and from where that cash is procured. This report is especially significant for early-stage businesses in which cash is tight: The cash flow statement demonstrates when you are probably going to require greater investment—or run out of cash at the current rate.

You can manually build these reports in a spreadsheet toward the month's end, however assuming you use accounting software, most platforms have inherent reporting modules that generate exceptional financial statements in professional-looking formats, prepared to present to investors or board members.

8. Build up an organization's cost policy

Making an idiot-proof cost-tracking system is urgent in dealing with your business finances and cash flow. Regardless of whether you choose to give employees a corporate credit card or work with employee repayments utilizing a device like Expensify, set aside the effort to set up an organization's credit card policy, cost guidelines, and cost tracking and reporting protocol for your business. Keeps your policy as clear and straightforward as could really be expected, simplifying it for employees to agree

Past monitoring business expenses, a careful corporate cost policy is imperative to execute and follow should your business go through an audit down the line.


9. Choose whether to hire a bookkeeper.

Albeit some bookkeeping tasks are genuinely direct, they are regularly tedious and require an emphasis on detail to convey blunder-free data. Taking care of all the startup bookkeeping yourself might save paying fees to a professional, yet make sure to consider the worth of your time and the expected cost of any slip-ups to your business. Consider working with a professional bookkeeper who will finish these jobs for you, either by hiring an in-house bookkeeper or outsourcing this work to virtual bookkeeping services. Having a bookkeeper in your group implies they are centered on your business, yet remember that hiring an extra employee is typically considerably more costly than outsourcing your bookkeeping tasks.

Also Read: How Outsource Payroll Services Helps Your Business

How Global FPO Helps Startups Build the Best Bookkeeping System for Their Business

The fastest, best method for building the right finance processes for your business is to work with a professional on your startup's bookkeeping setup. At Global FPO, our group has seen the bookkeeping challenges that startups face on many occasions, so we made a finance service that assists businesses with keeping away from normal bookkeeping mistakes and building the right financial establishment to develop.

Global FPO(www.globalfpo.com)is a bookkeeping and accounting services in USA firm consistently recognized for its exceptional outcomes and strong work culture, with 500+ happy and satisfied clients across. They provide everything from straightforward tax return work, or basic bookkeeping, to advanced & complex Financial Statements to CPAs and accounting Firms implementing best industry practices & values. Their Accounting services are comprehensive, customized to unique business operating model,s and use “best-of-breed” technology under a strong two-tier reviewing mechanism ensuring minimum risk of error.

Global FPO is a professional outsourcing and consulting organization offering services across the globe including USA, Canada, UK, Europe, Australia, New-Zealand, Japan, Dubai and Far East. GFPO experts provide services at competitive prices to our clients in the areas of:

  1. Bookkeeping & Controller level services
  1. Tax Filing,
  1. Payroll processing
  1. Accounting Advisory and GAAP Reporting
  1. Audit and Transformation consulting

To explore more on Global FPO and its online Accounting/ Bookkeeping, Tax Return Preparation, Financial Statements, Accounting Advisory, Payroll Processing, and related Business Services contact us at:

Phone (USA): +1 (832) 426-2521, +1 (347) 781 5928 or

Email: contact@globalfpo.com.

Tags: bookkeeping and accounting services in usa, Accounting services

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