Options
The basic choices for keeping business records are:
- Manual records in a hard-backed book. Either in a ruled book or in a printed business accounts book.
- Spreadsheets. A great deal can be achieved with properly set up spreadsheets.
- A home accounting package such as Quicken or Microsoft Money. These should be avoided. Trying to adapt these to a business is more difficult than it seems.
- A basic bookkeeping package for those who are processing a lot of similar transactions but who do not need sophisticated reports.
- A full accounting package for those who need complex reports or who have to track many different stock items.
- Specialist software for those in unusual industries such as insurance brokers.
As a general rule, choose the simplest package that will met your requirements. There is no point in paying the extra cost of a more complex solution if you will not use the additional features.
Do not be misled by claims that different packages link together. For example, some payroll packages advertise that they link automatically or easily with general accounting packages. The ease and benefits of such links are often exaggerated.
Use of spreadsheets
Many start-up businesses successfully use spreadsheets as their main accounting records. Like a record book, you can make an explanatory note of an unusual transaction so that we can consider how to account for it later. By contrast, an accounting package forces you to select a particular treatment and does not allow you to explain what happened.
Payroll
Small and medium sized businesses should outsource their payroll because it is complex. As a general guide, unless you are producing 200 payslips a month (50 or more weekly paid staff) it is not worth installing your own payroll software. Many very large businesses outsource all their payroll.
Monthly checks
Whatever accounting system you use, it is essential that you check your records at least monthly.
Your records should calculate an expected balance on the business bank account and you should check that with the bank statements.
You should calculate the total of each type of payment and check that these add up to the grand total. Spreadsheets are particularly good at this.
You should file the purchase invoices , receipts and other documents in a way that they relate to the payment records. A simple way is to have a folder for each month.
You should check the amounts still owing to you by customers and chase up payment. A customer who does not pay a fair rate for the work is not a real customer, he is a sponger.