Checklist: Basic Bookkeeping Setup for Small Businesses

When it comes to starting a small business, it’s so much more than having a product or service to offer—you need solid financial footing to maintain flexibility for years to come. Bookkeeping constitutes a fundamental cornerstone. If you’re trying to figure out how to do bookkeeping for a small business, this blog brings you the answer by giving you a step-by-step guide to getting started with bookkeeping, as well as the tools, tips and must-knows to ensure your books are kept in order right from the word go.

Bookkeeping Checklist: What You Need to Get Started

Whether you are a solo entrepreneur or a growing team, this comprehensive bookkeeping checklist will help you get started right away:

Whether you are a solo entrepreneur or a growing team, this comprehensive bookkeeping checklist will help you get started right away:

Choose Your Bookkeeping Method

Start with the structure of your bookkeeping system:

• Cash Basis: Records transactions once receiving or making a payment.
• Accrual Basis: It records income and expenses as they occur or are incurred rather than when money changes hands.
• Tip: For a clearer picture of your finances, even as your business grows, you may prefer the accrual basis.

Select the Right Bookkeeping Software

There are a few setup applications that can facilitate the bookkeeping activities of small-scale businesses. Either one may be right for you, depending on your needs and budget:

• QuickBooks: Perfect for growing businesses that need robust features like payroll, invoicing, and tax tracking.
• Wave is a free and user-friendly platform designed for small service enterprises or freelancers.
• Xero: Cloud-based, easily scalable, and works with a wide range of third-party apps.

Pick a service that caters to your industry and syncs with your bank account so you can track transactions in real time.

Open a Business Bank Account

If there is one thing that legitimizes your business, it is having a separate business bank account.

Financially combining one’s personal and corporate life is a major error. Here are the reasons you need a business account from Konto: Open a separate business account to:

• Maintain clear financial separation.
• Simplify tax filing.
• Enhance reputation among customers and suppliers
• Also, think about opening a separate credit card just for business expenses.

Chart of Accounts (CoA) Definition and Setup

Your chart of accounts serves as the framework for your accounting records.

It lists all expenses in financial categories, such as

• Assets (e.g., cash, inventory)
• Liabilities (such as credit cards or loans)
• Revenue (e.g., sales income)
• Expenses (e.g., utilities, rent, salaries)
• Equity (e.g., owner’s capital)

A well-designed CoA makes financial reports clear and useful so they can be used to make decisions.

Track Income and Expenses

Begin posting transactions as they occur.

• Keep track of all payments, credits, and discounts.
• Break down expenses such as utilities, supplies, subscriptions, etc.
• Compare transactions to bank and credit card statements.
• Much of this is automated by most accounting software, but make sure to take time to periodically review entries.

Invoice and Get Paid

It’s crucial that invoicing be done in a timely fashion for a healthy cash flow. Use bookkeeping tools to:

• Generate professional invoices.
• Establish payment terms and reminders with no hassle.
• Track overdue payments

When it comes to recurring invoicing and payment tracking, both QuickBooks and Xero are viable options.

Set Up a Filing and Document Storage System

Financial paperwork matters, even in a digital-first world:

• Maintain digital receipts, bills, and bank statements.
• Leverage cloud storage services (Google Drive, Dropbox).
• Name files by month/year and category (i.e., taxes, payroll, utilities).

 Many programs now offer receipt scanning and automatic categorisation.

Comply with Tax and Legal Regulations

Compliance is also an integral part of any rudimentary bookkeeping setup.

• Track taxes collected and due to be paid.
• Be aware of the taxes you owe, both local and federal.
• Prepare income statement and balance sheet reports for tax preparation.
• Maybe talk to a CPA or your bookkeeper for year-end support.
• Calendar any dissimilar quarterly tax payments.

Schedule Regular Bookkeeping Reviews

Maintaining the books is a continuous process. Stay proactive:

• Perform monthly bank reconciliations.
• Review cash flow reports.
• Check accounts receivable/payable balances.
• Update your budget and tweak your money goals.

Back Up Your Data

• Always have a backup plan.
• Utilize cloud-based software that backs up automatically.
• Transfer monthly data to an external disk or encrypted storage.
• Safeguard your financial information from breaches and losses.

Final Thoughts

Establishing bookkeeping the correct way from the start saves time, avoids costly errors, and provides you with real-time financial information. With the right software, small business owners will know if they need to make changes to help their business expand and grow, plan for taxes, and ensure compliance.