No matter what the size of your business, bookkeeping needs to be given its due importance as a vital part of the enterprise. And if you are a small business owner, the bookkeeping system is the wire-frame your operations run on. If bookkeeping is not implemented well, you are going to suffer for the lack of quality information to make informed financial decisions. There are five pillars good bookkeeping stands on, and you need to keep these in mind when devising your own system.
The Process System
This bookkeeping element is all about helping the entrepreneur or owner keep a handle on who is specifically responsible for different tasks. So who is it that is responsible for filing information and who is supposed to get all the relevant documents signed by a given date? The process system also underlines the most appropriate procedures that would get the task done in the most efficient manner.
The filing system helps you organize your files so that they are always readily available for you to find when you need them. It prevents you from wasting valuable time, and helps with your work being execute din a smoother and more professional manner. It allows for more efficient operations, and helps the office staff to refer the right documents and papers when required by a customer. Additionally, by referring to past management records, it can be easier to frame business policy or to plan out a project. A good filing system can also help you in the long run as well by protecting the documents from any potential damage or loss.
Chart of Account
This element basically highlights what the numbers do. It is a financial tool that lists all the accounts used in an organization’s general ledger. The accounts here refer to the records made for every type of asset, liability and equity, as well as expenses and revenues. The accounting software will then make use of this chart of accounts to aggregate all of this information into the entity’s financial statements, like its income statement and balance sheet. Specific accounts are made easy to locate by sorting the chart by account number.
The reporting package allows the entrepreneur or owner to have access to the information that lets then run their business efficiently. This allows them to easily crunch and analyze the numbers and gain deeper insights into their business.
Transactional Record System
This component essentially refers to the software that records financial transactions. Examples of these include MS Excel and Simple Accounting.
These 5 key elements should serve to help you organize and track your accounting system. Of course, as your business grows, you will need to continually purchase upgrades in order to sufficiently meet new demands, but this is the basic foundation that will remain in place. Your system should be easy to understand and run for you and your staff. These five components will help you do just that by enabling you to design an effective and user-friendly system.