• Zoe

6 steps to follow to set up your accounting system

Updated: Sep 6, 2018


So you've decided to set up an accounting system, whether you're just starting out or have been running for a while and keeping your records on paper or spreadsheets, well done, you've made a great decision. Here are six tips to help you get started.


1. Choose an accounting system

This is fairly obvious. The first thing to do is to decide which accounting system you use. This will partly come down to your personal preference, how the software looks, the support available and how you find it to use. If you need some guidance on this, do take a look at our post How we rank 5 top accounting systems. If you haven't used accounting systems before, your decision might be influenced by recommendations from other small businesses or from your bookkeeper if you're working with one. You need to make sure you're choosing software with the right features for your business, it's not always necessary to have every single feature so you might find you can save money by selecting an entry level version of the software rather than the pro version on day one (but be sure you're selecting software which can grow with you as your business does). Your bookkeeper is likely to work with one or two software suppliers closely and will be well placed to help you choose the right system the features you need at the best price for your business.


2. Decide when to make the switch

The best time to set up an accounting system is before you've started your business, but that might be a bit late for you and I'd say the next best time is at the start of a new financial year. I'm writing this post in June which means if you're a sole trader, you've missed the start of this financial year, but I would say, if you don't have too many transactions and you can bear it, it would be worth going back to April and recording your transactions in an accounting system if you can. 9 more months working on paper and spreadsheets is a long time to wait when you can have the lovely data which is available from an accounting system at your finger tips. If you do need to set up an accounting system part way through a year, that's ok, just pick a date to stop using your old system and make sure every subsequent transaction is recorded in your accounting system.

If you're not sure when to switch accounting systems, why not read our post When's the best time to set up a new accounting system?


3. Set up your chart of accounts

Here's a great jargon term for you. Your chart of accounts is the list of "codes" or "accounts" you'll use to record your transactions against. Your new accounting system might be set up to record Sales against code 101, materials costs against 201, and transport costs against 250 for example. Most accounting systems have a pre-defined chart of accounts and it's usually absolutely fine. If you want to customise it a bit though, now's a great time to do it. Let's say you want to divide the sales of your greetings cards business into sales of birthday cards, sales of valentines cards and sales of wedding day cards, you might choose to set up codes 102, 103 and 104 to give this level of detail.


4. Connect your bank account

The wonderful thing about having an accounting system is that you can connect your business bank account. All your bank transactions will feed into your accounting system and you can run through the list and record each of them in just a couple of clicks (honestly, you'll wonder why it took you so long to make the leap into the world of accounting software). Connect your bank account now and leave the days of paper bank statements in the past.


5. Enter your opening balances

If your business doesn't have any transactions yet, you can skip this step, but if you've been trading for a while, you'll need to enter your opening balances. This can get a bit technical and I'd recommend speaking to a bookkeeper or accountant if you're not sure - or your new software provider, but put simply, if it's the start of your financial year, you'll need to record the value of any assets or liabilities of the business (things like machinery, stock, bank balances, loans). If you're part way through a year, as well as recording assets and liabilities, you'll also need to record any sales and expenses for the financial year to date.


6. Start using your system

And now you're ready to start using your accounting system. Get into good habits and record those bank transactions regularly and you'll be amazed at how much easier it is to understand your business accounts.


If you need some help with setting up your accounting system, please get in touch, we'd love to help.

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