You’ve already cleared the first hurdle, and it was a tall one: the decision to create a business of your own. As you’ve planned and set goals and built a structure, you’ve undoubtedly had to make many others.
Before you even open your business checking account, though, it’s important that you know how you’ll be managing your finances. Even very small businesses need an accounting system that will be easy to use, accurate, and able to answer the daily questions you have about your money.
There are numerous ways you can do this, but they fall into six larger categories.
Up until the 1980s, this was typically the only option available for small businesses. It may still work for you at the beginning if you only:
Maintain a business bank account,
Send a few invoices every month, and,
Set up a filing or file card system for recording information about customers, products or services, etc.
If you know something about Microsoft’s spreadsheet application or are willing to learn, you can use it to create lists and tables, and to do your calculating.
Simple accounting websites
When you’ve outgrown paper or if you simply want to create cloud-based records and transactions from the start, you can choose from a number of sites that help you automate basic financial functions. Ranging from free to a few dollars per month, these web-based applications offer a variety of tools. You may be able to, for example, connect to your financial account(s) and download transactions. Send invoices and receive payments online. And, run simple reports that give you an overview of your income and expenses.
Desktop accounting software
This type of application costs a few hundred dollars upfront. They’re built for more complex small businesses that want to follow standard accounting rules. They contain tools for managing accounts payable and receivable, time and expense billing, inventory, and payroll. Accounting software is designed so business owners who don’t have much financial management experience can learn to use it fairly easily. But often, consultation with an accountant, especially in the early setup stage, can help you avoid errors and ensure proper set up.
Cloud-based accounting solutions
Desktop software has some disadvantages, including the need to be working on the computer(s) where it’s installed. Because they’re newer, though, top-of-the-line accounting websites are not quite as advanced (in terms of features) as local solutions. But they’re not far behind. Like desktop software, you can customize them to meet your needs. And if the one you choose lacks functionality in a specific area, you can integrate it with any of hundreds of add-on solutions. You’ll pay a subscription fee for the main accounting sites, ranging from roughly $20-70/month.
Because switching from one method to another can be challenging and time-consuming, you’d be wise to select an option that doesn’t overwhelm you but leaves you some room to grow. We’d be happy to help you choose and get started. Feel free to contact us for questions or assistance.
Harmony, Futuristic, Arranger, Restorative, Woo
Client Advisory Services Manager
Amanda Harpster is a Client Advisory Services Manager at Lutz. She began her career in 2005. She focuses on QuickBooks support, tax and payroll compliance, and small business consulting.
We work to simplify complexities, help make critical business decisions, and confidently focus on the things that are truly important to you. We embrace your business as our own to spark the right solutions and help you thrive.