How do I set up an accounting system for a small business?

Good news. Setting up a small business accounting system is easier than ever. Accounting software are essential for businesses to accurately report their financials to stakeholders or the IRS in the case of an audit. Accounting software has completely changed outsourced accounting for the better with automation, security, and simplicity. 

How Do I Set Up a Small Business Bookkeeping System?

Setting up a small business bookkeeping system is fairly easy. The majority of the work comes from finalizing a chart of accounts and uploading business information. Below is our checklist for setting up an accounting system. 

Accounting System Setup Checklist – Initial

• Sign up for an accounting system such as QBO
• Enter your company information
• Establish a chart of accounts
• Enter customer lists, vendor lists, employee lists, and inventory
• Enter historical financial transactions
• Link any business bank accounts and credit card accounts

Accounting System Setup Checklist – Eventual

• Invoicing
• Payroll Management
• Reporting

How Long Does It Take to Set Up an Accounting System?

Accounting systems are typically easy to implement. If you start from scratch, most accounting platforms take minutes to set up an account and get up and running. The main work is finalizing a chart of accounts. Automation and reporting can be implemented later. Businesses or non-profits with lots of paper-and-pencil historical data will take longer to transition to an accounting system. 

Transitioning between two accounting systems is a more difficult task. It takes an understanding of how information is exported from one system and imported to another. Conversions are best handled by someone with experience transitioning from one system to another. Still, most system transfers take less than a full day’s work. 

How Do You Set Up a Simple Accounting System With Accounting Software?

The easiest way to set up an accounting system is typically Quickbooks Online (QBO). QBO is our top choice for a small business bookkeeping system. QBO allows for simple bookkeeping and, eventually, more complex reporting and accounting. Setting up an accounting system with QBO is as easy as creating an account and entering your accounting-relevant information, such as a chart of accounts and vendor lists. We also recommend linking banking and credit card accounts to make journal entries less cumbersome. 

Do Small Businesses Do Their Own Bookkeeping?

According to a recent study, around 64% of small businesses do their own bookkeeping. Small business owners often own the bookkeeping function at the onset of their business to limit costs and increase their financial understanding. However, once the business grows, many small businesses outsource their accounting function to give time back to the owner and bring an expert into the business. 

What Kind of Bookkeeping Is Used by Small Businesses?

The best practice is to use accrual accounting for small businesses. Cash basis accounting is more difficult to understand, since the expenses and revenue of a business for a given time period are based on cash transactions.

Accounting Tasks Checklist

Daily

• Reconcile bank accounts and credit cards
• Record transactions and categorize business expenses

Weekly

• Send Invoices
• Review Timesheets
• Record Payments

Monthly

• Pay vendor bills
• Track budget
• Review Forecasts
• Perform month-end close procedures
• Run trial balances
• Create future targets
• Prepare reports
• Run financial review meetings to look over financial statements 

How Do Small Businesses Keep Bookkeeping Records?

Almost all small businesses keep their bookkeeping records on an accounting software system. The best practice is to use a cloud-based accounting platform such as QBO or NetSuite. Desktop or local servers are more susceptible to physical damage, making cloud-based bookkeeping more secure. Cloud-based virtual accounting services also make access and reporting easier to share. 

How Do I Set up Manual Bookkeeping for My Small Business?

If you are asking, “How to do bookkeeping for small businesses manually,” then you are probably a small business owner looking to save costs. Paper and pen manual bookkeeping is a thing of the past. Now, robust accounting platforms offer free or limited versions of their software for small business owners to do manual bookkeeping. Manual bookkeeping looks like setting up an account on one of these platforms and recording and reconciling all business transactions. The benefit of these platforms is they are scalable and have the ability to automate. So, when the time comes, as your business grows, you won’t have to worry about switching platforms and moving to a new accounting method. 

How Milestone Can Help

Our team at Milestone has helped set up hundreds of small businesses’ accounting systems. We have a dedicated team to implement or convert your accounting system. We do CFO, controllership, and bookkeeping for small businesses. Our mission is to make a difference for entrepreneurs and small business owners like you, who are making a difference every day. Reach out to our team today to improve your accounting function.