Bookkeeping Systems: 5 Essential Components

The Proper Foundation

Five components are essential in designing the proper accounting system for your home based business. These components form the foundation upon which you will make informed business decisions. They are your:

  1. Filing System:  so you can lay your hands on documents when you need them
  2. Transactional Recording System: some examples include QuickBooks or Excel
  3. Chart of Accounts: which shows what the numbers do
  4. Processes and Procedures: who does what and how they do it
  5. Reporting Package: structure used to run your business

Your Bookkeeping System Should Serve You

It’s important to understand that your accounting system will change as your business grows.

Your size, your business structure, your industry, your internal control requirements means your system needs to be considered carefully. It needs to be designed so it is easy to use and in such a way that you can understand it even if you don’t have bookkeeping training. In other words, your accounting system needs to serve you just as well as your bookkeeper.

To serve you well, it needs to:

  •  Help you make sound business decisions by answering questions like: “Are you charging enough to cover your expenses? What is your profit margin? Are you spending too much?”
  • Track criteria agreed upon in bank lending arrangements
  • Aid in the efficient and accurate preparation of all your compliance tax returns (sales, payroll, worker compensation and income taxes)
  • Ensure you can pass a tax audit with flying colours by tracking what is required by law and having a system to retain your support documentation

Source: Bookkeeping Essentials Blog

Share this

Latest Insights

Recent posts from our blog

Rock your networking social event

Our top tips for rocking your next networking social event (part 2) While these hot summer days might make you tempted to take a long vacation and ignore any non-essential work, don’t slack on your business development activities. In today’s competitive business environment, building and maintaining relationships is essential, and networking is the best low-cost […]

Bookkeeping vs. accounting: What’s the difference?

Bookkeeping vs accounting If bookkeepers and accountants are both responsible for dealing with your business’s finances, do you need to have both on your team? The simple answer is yes, you definitely need both. While bookkeeping vs accounting may seem like the same profession because they both deal with financial data and require basic accounting […]

Do you have a file you need to send to us? Would you like to make a payement?