It’s exactly what you were hoping for. You took a chance and started your business and for lack of a better phrase, business is booming. You’re beyond busy with clients, customers or orders. You’re up early and working late. Weekends are no longer free. But in all the excitement, some things have taken a back seat. Maybe you haven’t had time to get a company website up. Or maybe you haven’t dedicated time to recruiting. Or maybe you haven’t set up your business accounting yet. If the latter is the case, you need to do two things:
- Don’t panic.
- Get started!
The Longer You Wait, The Worse It’ll Be
If you haven’t gotten around to setting up your business’s accounting system, that’s OK. We’re not here to come down on you for that. But the truth of the matter is that the longer you procrastinate on putting an accounting system in place, the harder and more laborious it will be. Think about which is easier: organizing a month’s worth of income and expenses or a year’s worth? The answer is obvious.
Gather Your Data
Even though you haven’t got an accounting system in place, hopefully you have been tracking money in and money out of your business. Perhaps you’ve been tracking work or product invoiced in an Excel spreadsheet. And maybe you’ve been keeping your business expense receipts in a shoebox. Regardless of your current “system,” in order to get set up with a true accounting software app you’ll need to gather up your business’s financial transaction history. Again, the longer you wait to do this, the tougher it will be to get organized.
If you’ve been using a business bank account to make purchases and deposit revenue, that’s good! Your monthly statements will be a good source of transaction history.
Selecting an Accounting App
Naturally we’re biased here, but you’ll want to spend a few minutes comparing the various accounting software solutions that are on the market. The key is to select one that easy to use, in your price range, is actually real accounting not just record-keeping, and most importantly, fits the needs of your business and your workstyle.
Know What Can Be Automated and What Can’t
With an accounting app selected, you’ll likely be able to connect your business bank account. This will be super helpful in getting your banking transaction histories into the system. (The alternative would be to upload transactions manually.)
On the flip side, if you’ve billed or charged a handful of clients or customers in an informal way, you’ll want to create invoices for each occurrence. Make sure issue and due dates are accurate so that you’ll be able to match payments. Hopefully you won’t have a lot of historical invoices that need to be created.
Keep in mind that when you’re doing historical accounting like this accurate dating is critical. Think about it: if you’re creating a bunch of invoices that that technically happened in the past, say, six months, assigning each one the right date (not just the date on which you generated the invoices) will make sure that payment (aka, revenue) is recognized in the appropriate timeframe. This will directly impact your financial reports, and ultimately, your quarterly tax obligations (if applicable).
Having to “go back” and get your books in order may feel like a daunting task—especially when there’s so much other work to do—but it’s necessary. Your books are the lifeblood of your business. When they’re in order, you can be confident that you’re making accurate, financially informed decisions. So be patient. Carve off 30 minutes a day to do a little historical bookkeeping and you’ll chip away at it in no time. And once you’re up-to-date and fresh, there’s no feeling like it.