Future-Proofing Your Finances: How to Setup a Sturdy Accounting & Bookkeeping System for Your Business
Versa Cloud ERP
Versa ERP is a modern all-in-one software created for fast growing manufacturing, distribution, and e-commerce SMB's.
Each business’s bookkeeping system should accommodate its unique revenue archetype, the magnitude of the team, and its blueprints for expansion. To construct a bookkeeping system that operates for your startup, you’ll need to make several key resolutions regarding the implements to employ and the approach to embrace. This bookkeeping configuration guidebook outlines the alternatives at each stage of constituting your system.
Elect Either Cash or Accrual Accounting Methodology
Opting to utilize either the cash or accrual accounting methodology institutes how and when your business will document transactions. Cash accounting records expenses and income when cash exchanges hands, while accrual accounting recognizes revenue or expenses at the time frame of delivery of goods or services.
For small businesses that desire an effortless bookkeeping system and don’t scheme to scale, cash accounting is a straightforward technique to monitor payments. However, for startups that intend to thrive, it makes sense to employ accrual accounting from day one. If you blueprint to raise venture capital, investors will expect to see reports that reflect accrual and GAAP methodologies, and businesses with over $5 million in annual revenue are mandated by the IRS to use accrual accounting. Accrual accounting also provides a more precise portrait of the business’s financial fitness and is the base of proper financial modeling and projections.
Unfasten a Business Bank Account
Segregate the business’s cash from your funds by configuring separate bank accounts for business expenses. It’s simpler to accurately monitor the business’s expenditures when you don’t need to organize them from personal purchases, deposits, or expenses—plus, you can identify potential business tax deductions and assist in streamlining tax preparations.
When opting for a bank account for your business, evaluate each alternative with these considerations in mind:
Configure Accounting Software
Some founders opt to learn how to execute manual bookkeeping, but with the variety of available bookkeeping software to regulate your accounts, this isn’t necessary. It is feasible to handle your bookkeeping in a simple spreadsheet program like Excel if you only course of action a handful of journal entries, but it’s effortless to commit errors with manual bookkeeping entries—and if the business amplifies larger and more complex, it will soon consume hours of work to envelope the essentials.
Alternatively, you can employ business accounting software like Versa Cloud ERP to automate numerous bookkeeping processes—including categorizing expenses, generating invoices, and constructing reports—so your bookkeeping consumes a fraction of the time. Because accounting software syncs all the data from bank accounts and credit cards onto one platform and proffers integrations with other finance-related implements, you gain a full portrait of your finances without needing to manually download the minutiae from each account separately. For advice on how to opt for the right accounting software for your business, examine our comparison guide of accounting software alternatives for startups.
Whichever accounting software you opt for, you will need to customize it to accommodate your business. This process entails first configuring the software to employ either cash or accrual-based accounting. Most accounting software programs include a basic chart of accounts, but you should configure a chart of accounts that is specific to your business, encompassing numbered expense accounts and categories for revenue. If your expenses are grouped into preset categories that don’t reflect your operations, it can consume weeks to retrospectively organize the data and provide accurate reports for board members and investors.
Connect a Payment Collection System
To make your business feasible, you need a technique for customers to pay. You can embark on accepting online payments approximately instantaneously through payment gateways like Stripe or PayPal. These systems are familiar to numerous customers and only charge a small fee for each payment your course of action. For a more comprehensive accounts receivable solution that accepts multiple payment types (like ACH transfers and wire transfers) and processes international payments, advanced billing solutions like Chargebee or Recurly handle every stride of the payment process from generating invoices to assembling customer details to sending receipts. Connect your billing system with your accounting software to automatically document these financial transactions.
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Configure a Payroll System
Before you hire your first employee, you need a system in place to pay them. As well as ensuring paychecks are correct and timely, employers are also mandated to complete the following payroll processes:
Most businesses employ either a payroll service or professional employee organization (PEO) to assist them regulate these.
Future Proof Accounting with Versa Cloud ERP
If your startup's bookkeeping becomes more complex, consider transitioning to Versa Cloud ERP. Versa’s integrated all-in-one platform combines accounting, inventory, sales, and business intelligence tools to streamline your key financial processes.
Interested to see how Versa could optimize your workflow? Schedule a free customized demo with our experts to experience firsthand how this solution enables growth through real-time financial visibility and efficiency features.
Versa empowers startups by taking the guesswork out of bookkeeping. Begin your no-obligation free trial today and build the accounting foundation to scale your business with confidence.
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