Bookkeeping Systems

5 Essential Components

Bookkeeping systems are the backbone of every small business, whether the owners know it or not.

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If you are a small business owner, it’s probably a good bet that bookkeeping isn’t your cup of tea. On the other hand, some people love bookkeeping (like me). Whatever way you look at it, it’s a necessary component of running a successful business. So I say .. if you gotta do it, you might as well do it properly.

Be Present to the Moment

Before we start. Bring your mind here to this page. Let every other thought go … just for now. Take a deep breath and let it out slooooowly …. okay here we go.

The Proper Foundation

Five components are essential in designing the proper accounting system for your home based business. These components form the foundation upon which you will make informed business decisions. They are your:

1. filing system (so you can lay your hands on documents when you need them);
2. transactional recording system (my preference is QuickBooks® but Excel is also a popular choice);
3. chart of accounts (shows what the numbers do);
4. processes (who does what) and procedures (how they do it);
5. reporting package structure (used to run your business).

Your Bookkeeping System Should Serve You

It’s important to understand that your accounting system will change as your business grows.

Your size, your business structure, your industry, your internal control requirements means your system needs to be considered carefully. It needs to be designed so it is easy to use and in such a way that you can understand it even if you don’t have bookkeeping training. In other words, your accounting system needs to serve you just as well as your bookkeeper.

To serve you well, it needs to ...

• Help you make sound business decisions by answering questions like - are you charging enough to cover your expenses or what is your profit margin or are you spending too much.
• Track criteria agreed upon in bank lending arrangements.
• Aid in the efficient and accurate preparation of all your compliance tax returns (sales, payroll, worker compensation and income taxes).
• Ensure you can pass a tax audit with flying colours by tracking what is required by law and having a system to retain your support documentation.

We’ll cover each of the five aspects separately in the coming days. But before we begin we need to consider ...

... a yardstick to evaluate your bookkeeping system.

Shhhhhh ... Intuit Canada is giving away free software to Canadian small businesses

I was reading the ProAdvisor® newsletter and the CA ezine today. This caught my eye in both publications. It's a great opportunity to see if it's the right fit for a bookkeeping system for your business.

Intuit is now giving small businesses the opportunity to try out their QuickBooks® software for free. It's their way of helping out in today's tough economy. It is the full featured edition. The free edition will handle up to 20 customers or vendors.

You can download the free bookkeeping systems software at QuickBooks® Canada EasyStart - Free Starter Edition

Benefits to you:

• track every cent of every business transaction so you can run valuable business reports
• organizes your records for easy tax preparation throughout the year instead of at tax time
• automates routine transactions freeing up your time for other things

Heads up on possible install problem

Some people might run into a bit of a glitch trying to install the program. As it is free, you should be taken to the registration screen. If however a screen appears requesting a license number and product number (which you won't have) Intuit says to enter the following:

license: 4724-9993-5102-601
product: 224-868

You should then be on your way. If it also asks for a validation code, call 1-866-994-0443 (Intuit's activation line) and they will activate the product for you.

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