Your reports will look different depending on which you decide to use. When starting a new small business, one of the first steps should be opening a business checking account. You might also consider opening a savings account to deposit tax obligations. When choosing an accounting software program, one of the first things you need to decide is how you’ll use it and the features you’ll need.

Accounts Payable is an expense account that lets you know how much money you owe to your creditors. Rent, business insurance, and software subscriptions are expenses you pay before receiving the benefit of the service—these are prepaid expenses. However, the accrual method is the required method for large corporations in the U.S., and besides that, it tends to provide you with a more accurate picture of your overall finances. In the cash method of accounting, you record the transaction only when the money has actually changed hands. So, even though you received an invoice in January, you’d record the expense as a cash transaction in February, on the date that it was paid. While accounting encompasses these data-gathering duties, this field also tends to involve analyzing the numbers and making profit and loss projections.

Generating Cash Flow Statements

Each template is free to download, printable, and fully customizable to meet your business needs. To prepare a profit and loss statement, first include all the revenue your business made during that period. Finally, bookkeeping subtract your total expenses from your total revenue to get your bottom line. Before you start bookkeeping, you need to determine the right bookkeeping method and corresponding accounting method for your business.

The software program can then make the calculations for you, giving you an accurate picture of your total income and spending that’s updated every time your money moves. Bookkeeping is a process of recording all your transactions in bookkeeping software, saving business-related receipts and preparing the data for the accountant. Financial reporting is the summarizing of your business’s financial data into financial statements, such as the profit and loss statement, balance sheet, and cash flow.

Bookkeeping for small businesses: Five easy steps

Single-entry bookkeeping is simpler — you only have to record each transaction once. This can be sufficient for very small businesses that aren’t incorporated. As a business owner, you’ll most likely have to create a complete financial report at least once a year, for tax purposes. However, there are plenty of reasons to make quarterly, or monthly financial statements as well.

Stay informed about your tax obligations, create reminders for all deadlines, such as HST tax payments or Corporate tax payments, and consider consulting a tax professional for guidance. Not Staying Consistent with Record Keeping can lead to lost or forgotten transactions, distorting your financial picture. To avoid this, set a regular schedule for updating your books, such as daily or weekly, and stick to it. If you are looking for more tips and tricks for your DIY bookkeeping, please check out our blog post devoted to Bookkeeping tips for small businesses.

The FIFO accounting method

Track business expenses such as transportation, entertainment, lodging, and meals with this expense report template. Specify the time frame at the top of the spreadsheet and list all expenses with dates for each transaction. The template provides space to add notes or detailed descriptions as needed. Track the value of your current inventory and determine the cost of goods sold with this inventory tracking template.

• Use this mileage log template to track business vehicle use and mileage costs.
• Paying bills on time and in full is essential for maintaining good relationships with vendors and avoiding late fees.
• Record debit and credit transactions and balances for multiple accounts in this accounting journal template.
• Most accounting software automatically determines which accounts to debit and credit for a given journal entry, if the underlying transaction is categorized correctly.
• To save on costs and add efficiency to your business, consider video conferencing, a cloud phone system, and having remote employees.
• Many business owners struggle with maintaining company books, and it leads to a lot of confusion with its accounts and finance.