Many small start-up businesses are off-and-running before any record system has been set up. There is money deposited into the new business checking account, some from invested funds and some from sales. There has been money paid out for equipment, supplies, etc., some by check and some by cash out of pocket or from sales receipts.
This informal method of cash receipts and disbursements needs to be formalized. The bookkeeping system does not need to be complicated. In most cases, you can continue to operate much as you have. You just need to do it in a way that leaves a few more tracks.
For example, make all purchases by check. The small miscellaneous cash paid-outs from your pocket (or the petty cash box) are reimbursed by a check with a listing of the expense codes. All your cash receipts are deposited into the bank. No more taking cash from the till for lunches, supplies, etc.
If all the money received by the business is deposited into the bank and all expenses are paid by a company check, the proper journal entries are easy to create from the bank statement.
If you are starting a new business, don’t wait until the end of the year and surprise your accountant with a box of miscellaneous receipts. That is the most expensive and least effective use of your accounting information. In addition to setting up the proper record system, your accountant will provide you with guidance on other business, financial, and tax due dates and obligations. Many start up businesses fai within the first year due to a lack of information. Meet with your accountant throughout the year to do year round tax and business planning to make sure you keep your business on the proper path for success.
Feel free to contact our office if we can be of any help.
Written by: Doug Rodrigues