How to Keep Your Corporate Books

Bookkeeping is an important aspect of running any business, particularly ones in the midst of expansion. While companies are not legally obligated to maintain their books in any specific manner, they should be thorough and accurately indicate a business' revenue and expenses.

However, the Internal Revenue Service does require certain businesses to adhere to one of two basic but distinct forms of bookkeeping.

 

Cash accounting is the most common form of accounting, as it involves a more accurate and timely depiction of a business' finances. With the cash method, income and expenses are not recorded until payments - be it cash or check - are actually made.

On the other hand, with accrual accounting, expenses, orders and various forms of payment are registered when the transaction is agreed upon, regardless of when the money is received or paid. This method is a requirement of businesses that generate sales of more than $5 million per year.

While there are other minor requirements imposed by the IRS as to which method of bookkeeping businesses are obligated to practice, most small businesses would benefit most from accurate cash accounting.

 

Accounting records should be updated and maintained on a daily basis, as the books provide the only means of accurately assessing the financial well-being of a business.

For that matter, businesses, particularly those in the retail sector, need to implement a coherent receipt filing system. For small startups with fewer sales, a simple wooden box may suffice, but as a company begins to grow, it may need to adopt a more comprehensive approach, such as a cash register with an automated filing system.

Additionally, a comprehensive ledger that summarizes accounts received and payable should be updated on a fairly routine basis, depending on how often or how large company sales are.

Another basic accounting practice businesses should adopt is to draft routine financial reports, perhaps on an annual basis. While a ledger can provide an ongoing indication of a business' various transactions, a financial report provides a more large-scale indication of the company's growth prospects, its credit conditions and its profits.

Financial reports can be issued in a single, comprehensive document or among several distinct focuses. Either way, they should include cash flow analysis, a profit and loss forecast and a balance sheet.

 

While some of the aforementioned procedures may come across as intimidating, software programs such as QuickBooks provide a channel through which almost all of these practices can be easily and effectively implemented.

New users can find hundreds of tutorial videos on the internet, some of them devoted to specific tasks within the noted accounting program. There is also Intuit's online QuickBooks Support center. However, it is important to approach any new program with the intent of first understanding the basics.

That being said, there are three main categories on the QuickBooks homepageÂ--vendors, customers and employeesÂ--each with tools to help effectively navigate the program.

The Customer Center, for example, provides a list of customers and jobs, which can each be organized and documented according to relevant sales and transactions. The Company Snapshot is much like a financial statement or ledger, in that it shows a list of income and expenses, complete with graphs, tables and balances. Finally, the employees section, perhaps intuitively, involves all payroll data, but can also be used for interior correspondence matters.

Once a firm grasp of the basic setup is attained, it may be a good idea to begin customizing the program to suit one's needs. This may involve utilizing keyboard shortcutsÂ--which can be found in full in the program's help sectionÂ--organizing toolbar and display setting according to individuals needs and uses or choosing preferences, such as default accounts and interest rates, sales tax rates, frequency of reminders, etc.