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Start-up Business: Record Keeping and Reporting

May 21, 20247 min read

Start-up Business: Record Keeping and Reporting

You've imagined your business, now it's a reality! You have received your funding and have launched your business! You have created your website and set up your social media outlets. Your are building your client base and transactions are piling up. Congratulations! Now how do you record it?

Record keeping is the most overlooked area when it comes to running a business. An owner is so busy in all aspects of the operation of the business that record-keeping seems daunting! But, it does not have to be.

Here is a step by step on simplifying your record keeping:

Step 1: Open a business checking account

That sounds easy enough right? Go to the same bank you use for a personal account. You have already established a relationship there. For a checking account, you really need not do much digging for the best offer. The idea is to simplify your daily routine. If you need to take care of personal finances as well, it's all in one place.

Step 2: Choose an accounting method

Wait a minute? What method? There are different methods? Yes! But no worries! I got you! There are two kinds of accounting methods: Cash and Accrual.


This is the method people use on a daily basis, mostly without even giving it a second though. It comes natural. Everyone receives their earnings via check or direct deposit to their bank accounts (revenues) and use cash or credit card to pay for purchases (expenses). At year end, we file tax returns using cash basis accounting! Easy! However, the downside of doing business on a cash basis is that you can't tell right away who owes you and who you owe to? And that can be detrimental to your business!


This is a GAAP basis accounting method. GAAP stands for Generally Accepted Accounting Principals set by set by Financial Accounting Standards Board (FASB). This board has been setting accounting and reporting standards since 1970's. The purpose of these standards is to ensure reporting is comparable from one company to another, especially for those publicly traded ones.

For example, if one company purchases equipment to use in their business and put in inventory to sell versus a company that expenses the whole thing. The financials will not be showing the same information for those two companies. The first situation will show an asset on the balance sheet the other one will show an expense on the income statement.

The entity that loaned you your start-up funds will most likely require accrual basis and your start up may one day be a publicly traded company. So take the higher road; set up the books accrual basis.

Step 3: Decide on how and where to record transactions

You have three options to keep records: 1) Manual recording 2) Hire a bookkeeper and 3) Use a software

Manual recording:

With all the work you are doing to ensure your business is running, do you really have time to record transactions on paper? Would it really give you a big picture of where your business stands? Who owes you money? Who do you owe money too? This method is so prone to errors than any other method, I would recommend staying far away from it.

Hire a bookkeeper

This is a very good option! Bookkeepers can really help even on a part-time basis to ensure transactions are being recorded in a timely manner. As a start-up though, you want the initial funds to go towards building your client base. Once that base is at a certain level, you will know when a bookkeeper is needed.

Use a software

There are so many options for software such as Quickbooks, Oracle-NetSuite, Sage Intacct, SAP, Blackbaud, etc... Based on a start up budget, look for a simple and affordable solution like say Quickbooks. You can invoice your customers, you can import all banking info to reconcile cash, record inventory and expenses, etc... With a few clicks you can also have a big picture view of you company's balance sheet and income statement. If you need to do quarterly payments to the IRS, you can also run your income statement on a cash basis and pay estimated taxes.

If you have a not-for-profit business, Quickbooks can still help. But as your business grows you may need a more robust software from Blackbaud such as Raiser's Edge and Financial Edge. Together they are a fully integrated Revenue and General Ledger software that would make record keeping on Constituents, fundraising, and bookkeeping easy.

Step 4: Set up your chart of accounts

What is a chart of accounts? A chart of accounts includes all the accounts needed for a proper financial statement mainly:

1) Assets: Cash, Accounts Receivable, Inventory, Fixed Assets, etc..

2) Liabilities: Accounts Payable, Accrued Expenses, Deferred Revenues, etc...

3) Revenues: Inventory Sales, Services, etc..

4) Expenses:Cost of Goods Sold, Commissions, Payroll, Travel, etc...

5) Equity or Net Assets: Revenues net of Expenses

Don't panic, most software already come with basic chart of accounts. You just need to evaluate and choose the ones you will use.

As it relates to nonprofits, you will need to track general donations, funraising events and grants separately as these are different revenue sources.You can even track expenses related directly to each revenue source to better understand how successful your organization is performing.

Step 5: Select Payment terms and type

As you start selling inventory or providing services, you need to pick your payment terms. It's an important step as it will set the expectation for your clients to pay you and for you to keep a proper cash balance to run your business. If clients take too long to pay then you will see lower cash flow and you may not have enough to purchase more inventory or pay for expenses. It can be detrimental to your business.

Most payment terms are: Due upon receipt, Net 7 (day), Net 10 (days), Net (30) days. Based on what your business is, you will need to evaluate which term makes more sense.

As it relates to payment types, you need to provide your customers an easy way to pay so that you can get your funds faster. Most payment types would be Cash, Check, Credit Card, ACH, and Wire transfers. Again, it all depends on your business need. Say you are using Quickbooks, you can set up your books to accept credit card payment. As you send the invoice out, the software will include a payment link that your customer can use to pay online. It's easy for your customer and fast for you.

Step 6: Reconcile Accounts and Review Financials.

On a monthly basis you or your accountant should reconcile all bank and credit card account to the related statements. I have seen many times when transactions are categorized in a software but reconciled. In many instances there are duplications or missing transactions.

At a minimum you should run a balance sheet, a profit and loss and cash flow statements monthly and review them. You should also compare month to month or quarter to quarter or even year over year. Why? so that you can see trends and compare how the organization is performing.

Step 7: Set up Key Performance Indicators (KPIs)

KPIs are important financial and non-financial measurable value that helps businesses performance track against their targets For example, a financial KPI could be inventory turnover or donor retention in dollars, or accounts receivable collection cycle. Non-financial KPI can be Employee turnover, number of beneficiaries served, etc... Each industry will have their own KPIs to track.

Now that you have all the steps you need to do proper book-keeping, your can envision your success!! And if you need more help you know where to find me.

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