The World's Easiest Accounting System For Beginners And Pros Alike

If you are planning on setting up a business or are in the process of doing so here are a few tips to keep your financial life as simple as possible. This program can be started any time if you do not have an organized accounting system. By following these simple suggestions you will be helping to avoid a financial nightmare that plagues many business operations around tax time.

1. Set up s separate checking account for your business activities: One of the biggest mistakes entrepreneurs make at the beginning of their business is to pay for business expenses (letter head, office supplies, equipment, etc) from their personal checking account and with personal credit cards. While this is the fastest way to acquire business basics, it also lays the foundation for an accounting problem you don’t want or need to deal with. Instead, go to your bank and setup a separate checking account using a fictitious business name or some other identifier (if you are just setting up a new personal checking account) and deposit the money into that account for check writing purposes. If you have to use a credit card and you have cash advance feature, take a cash advance and put that in the checking account rather than using the credit card per transaction. Here’s why: You want to completely separate your personal finance from your business finance for accurate accounting and preparation for tax time. Beyond this, you will not be able to analyze your business economics (sales pro forma, cost analysis, write-offs, etc) as well if the financial picture is all blurry and fuzzy with a mixture of personal and business expenses. The only way you can achieve this is by depositing all business-related income into this business account and writing checks from this account to pay (all) your business expenses. You want a rock solid wall between you and the business, which divides the financial information surgically. The best way to do this is by setting up a separate checking account at the beginning of your business endeavor, before you do anything else.

2. When you set up your business account, order carbon-copy checks for your business. The reason for this is that you have a permanent record of all the checks you write in case you forget to log a check and duplicate checks provide an audit trail for all your expenses, which will be critically important at tax time for claiming business expenses and write-offs.

3. Most entrepreneurs are big on dreams and ideas and low on accounting and record keeping. One simple way you can be prepared for tax time is to simply put all records of your business income in one envelope titled " business income" and all receipts for business in another envelope titled "business expenses". By doing so, you will not have to sort through personal and business receipts to determine which are which. And if you have never spent hours and hours struggling to account for a quarter or year of mismanaged financial information then, take my word for it, you want to avoid this accounting nightmare by following this article advice.

Another advantage of using this simple system is that if you use the services of an accountant (which you should if you have income from the business) your accounting fees will be lower. Why? Because your accountant will have a much easier time preparing your tax returns and won’t have to charge you as much for sorting through jumbled financial information. That saves time when they bill by the hour.

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Copyright © 2006 James W. Hart, IV All Rights reserved