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If you’ve recently started a home business, chances are you don’t have the capital to hire a bookkeeper, an accountant and a tax professional. If you can use a calculator, you can handle these responsibilities quite easily, and wait to hire professionals until your business grows. You may not know where to begin when it comes to accounting, but we’re here to help. Here are five basics that will keep your books organized and legal:
1. Purchase Software
As your business grows, you’ll want to be sure that you have excellent accounting software installed on your computer. Because this software has a bit of a learning curve, it’s important to purchase and install it as soon as you decide that you’ll be keeping your own books. Popular home business accounting software includes Quicken and QuickBooks; either will be a welcome addition to your accounting arsenal.
2. Keep a Ledger, At First While you’re learning how to keep the books on your computer, make sure that you use the traditional method as well: a paper and pencil. While keeping two versions of your books will be more time-consuming, you can go to bed at night knowing that you haven’t missed anything. Additionally, keep in mind that once you’ve learned your software and are sure that it’s making the same calculations that you are, you can stop using your paper ledger.
3. Keep Records
You should keep all of your bank statements, canceled checks, receipts, deposit tickets and invoices. How you organize your records is up to you, but you should organize them in a manner that you can follow for years to come. Many business owners choose to use a filing system to keep great track of their records.
4. Keep it Simple
One of the biggest mistakes that small business owners make when it comes to accounting is over-complicating things. For instance, when you categorize your ledgers, you don’t need separate categories for pens, ink, paper and clips; instead, use one category titled “office supplies.” The simpler you keep your books; the less time it will take you to balance your ledgers at the end of the day.
5. Be Consistent
No matter how you choose to do the accounting for your small business, one of the most important things is to remain consistent. There’s nothing wrong with altering your methods that aren’t working, but don’t try to reinvent the wheel. Consistency will help ensure that you are keeping your books correctly, and will help you locate records should you be audited in the future. Consistent books will also be easier for an accountant to take over should you decide to hire a professional in the future. Most small business owners have absolutely no problem acting as their own accountants. If you keep your books organized and consistent, you’ll have a very clear idea of where you stand financially, you’ll have fewer problems with payroll and you’ll stay out of trouble with the IRS. By following the tips above, you’ll quickly find that accounting isn’t the minefield that you perceived it to be.
David Coon blogs about the importance of understanding finances and mastering basic accounting skills. If you are interested in a career in accounting, you might consider applying for a master’s degree at New England College (http://online.nec.edu/accounting-master-degree/) or University of Connecticut.