- Find an accounting software program to help track your finances. I recommend QuickBooks which is quick and easy to learn & use, as well as relatively inexpensive. However, don't solely rely on a computer based program. I highly recommend you also keep a separate manual check register as back up.
- Determine which accounting system will work best for your business:
- Cash based: You record your income & expenses as you pay or are paid. For example, Tom allowed a customer to purchase an item on credit. He wrote an IOU for the transaction, but won't enter it into his accounting system until his customer comes in next week to pay him the balance. Today is also the day Tom makes his weekly check run to pay off any invoices that are going to be due. He won't enter the transactions until after he has written the checks.
- Accrual based (which I personally recommend): You track all income & expenses as they happen, not when actual payment is made or received. This is a little more complicated than the cash based system, but it will allow you to know where your company stands financially at all times. For example, Mary made a sale today based on her customers credit. Although she hasn't physically received cash yet, she did make a sale and will enter it into her accounting system. She also received an invoice from the electric department. Even though she won't pay the invoice for a few weeks, she still enters it.
- Cash based: You record your income & expenses as you pay or are paid. For example, Tom allowed a customer to purchase an item on credit. He wrote an IOU for the transaction, but won't enter it into his accounting system until his customer comes in next week to pay him the balance. Today is also the day Tom makes his weekly check run to pay off any invoices that are going to be due. He won't enter the transactions until after he has written the checks.
- Keep all supporting documents and staple them to the corresponding check stub or copy of a customers invoice. Supporting documents may include purchase orders, invoices, receipts, notes logging conversations, etc. These will be especially useful in the event of an audit.
- Reconcile (balance) your bank statement every month. This assures that your business records and bank balance will be in sync. Always review cancelled checks before you allow anyone else to see them (including your accountant). This will alert you if any unauthorized checks are being written. Also, try to find a bank who's monthly cut-off date is the last day of the month. This will make reconciling much easier.
- Make sure to review your company's balance and income & expense reports each month. These will allow you to know where your company stands financially.
Anita DeFrank, owner of MommysHelperOnline.com is a busy work at home mom. MommysHelperOnline.com is the leading resource available online built to assist you with your home business. Whether you're brand new to the work at home game or you're an old pro, they can help.
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