What Do Startups Need to Know to Manage Their Books Properly?
Every financial transaction, such as sales, purchases, payments, receipts, payables, or receivables, must be recorded appropriately. A company maintains a detailed bookkeeping record of all the financial transactions for easy data access. You can save or retrieve any financial transaction record, even during an emergency. However, your bookkeeping practices can be foolproof only if you have clarity about credits, debits, and financial statements. This understanding empowers you to take control of your business’s financial health. At the same time, the purpose of bookkeeping should be clear to everyone. For example, senior executives depend on financial records to measure business performance, while accountants do bookkeeping to systematize financial statements, tax-related formalities, and government remittances. Likewise, auditors need bookkeeping records to verify the authenticity of transaction details.
A startup must follow four essential bookkeeping steps: source document collection, data entry into journals and accounts, account balance and reconciliation, and book closing for the period. Since it’s an extensive process, you can consult an agency. For help, visit Sound Advice Bookkeeping. Before talking to them, let’s gather more insights into the bookkeeping process, which requires accessing different accounts to maintain financial records.
- Debit balance account types
Cash, inventory, accounts receivables and expense accounts belong to this category. Almost all business transactions, such as cash receipts and disbursements, are recorded in cash accounts. One must perform reconciliation activity on the bank account to identify errors, pending transactions, etc. Account receivables are pending customer payments against your company’s services or products they use. Then, inventory can differ, including raw goods, ready-to-sell, and work-in-progress. The accounting records and the inventory items should match when you run a physical periodical check. Any mismatch between them can result from tracking mistakes involving raw goods and sold items. Or theft can be another possibility.
A startup should also keep an updated expense record in its expense account. You can categorize expenses as rent, insurance, cost of finished goods sold, etc. There can also be sub-groups depending on the project’s nature or business function.
- Credit balance account types
Account payable and loan payable are the credit balance accounts. Account payables show what your business owes to suppliers, employees, tax agencies, etc. Loan payable demonstrates the amount you borrow from banks, family, friends, shareholders, etc. The interest charges should be noted against every source or loan amount, even if you don’t have to pay them now.
It’s just one part of the bookkeeping process. Initially, you may be involved in it or hire a bookkeeping professional for assistance. However, the amount of work and concentration it demands can overwhelm you. But imagine the relief of having a professional bookkeeping service at your disposal. All the stress and worry about maintaining the books well, the records becoming chaotic due to poor data handling, and your receipt management system going messy can quickly dissipate. They will create a suitable path to make this functional task easy. You will get all your data on time, as they do everything regularly. Choose an agency that offers payment flexibility with hourly and monthly packages.
