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Cooking Business Accounting – Bookkeeping Basics
Cooking business accounting is just as important as marketing your product or service. If your bookkeeping system is poor, then your business can fail.
The business accounting system is crucial because it keeps track of the money going in and the money coming out of the business, it’s important to make sure that you don’t have more money going out than coming in or your business can go belly up. Going bust isn’t the only reason to have a cooking business accounting system in place, another important reason is that it is legally required and your accounting records are a great business management tool.
Being a new business owner you can create whatever type of accounting system you like, one that is compatible with your financial management skills and one that is compatible with the business type.
Some businesses use a checkbook and receipts system but you can make keeping your books easier by using an automated system, there are some really good automated accounting systems on the market that won’t break the budget, it’s recommended that new businesses use an automated system to make bookkeeping less stressful.
To determine if the cooking business accounting system you choose is a good one, it should meet three criteria, the system should be:
• accurate - the numbers should be correct and having an automated system helps to achieve accuracy, but the numbers should still be checked and double checked to make sure that they are correct.
• relevant - by law certain financial information must be tracked and maintained for tax reporting purposes, as a result the system must be able to keep and produced information that is needed and required along with information that is needed to successfully run the business.
• user friendly - if you need a CPA to run the system then you might as well hire one, so the system should be one that you can use, fortunately good systems have tutorials and onscreen help to assist the user.
There are two accounting systems in use, the accrual method and the cash basis method, and although most businesses use the accrual method, you should use the method that fits your type of business best. The method that is most appropriate depends on the business structure, sales volume, and whether the business sells on credit.
The cash method is the simplest method because it is based on the actual cash that flows into and out of the business, with income being reported when it is received and expenses being reported when they are actually paid. The cash method is generally used by sole proprietors and those businesses with no inventory.
The accrual method is used for recording income and expenses as they occur.
It is recommended that you consult your account regarding which accounting method will be best for your new business.
Accounting systems contain some basic key components which consist of:
• Chart of accounts – when setting up the accounting system these are the accounts that you want to track in your business, those that will have specific entries.
• General ledger – should be set up in the same order as your chart of accounts and does not include every entry in a certain period, but does include a summary of all transactions made.
• Accounts receivable - is used when a business sells services or goods as a method to keep track of who owes, what is owed and when it is due.
• Inventory – this is a key feature for a business that manufactures a product and helps the business keep track of raw materials, works-in-progress and finished goods.
• Fixed assets – these are items that are used over the long term of the business such as buildings, vehicles, equipment, machinery, land, and leasehold improvements if you lease rather than own an item.
• Accounts payable – is used to keep track of what you owe to vendors, who, how much, and when payment is due to the vendor.
• Payroll – is used to keep track of what you owe to employees who work for you. Federal and state laws are numerous regarding what you the employer have to keep track of regarding payroll. This system should definitely be automated to keep on the right side of the federal government.
One of the marvelous features of automated accounting systems is their ability to create financial statements which includes a balance sheet, income statement, reconciliation of net worth and cash flow statement. Having these financial statements at your fingertips makes it possible to make decisions about the future of your business that can help your business to grow or stave off disaster.
Some popular cooking business accounting systems are Intuits QuickBooks accounting systems from basic to advanced packages and Peachtree’s accounting systems packages which also range from basic to advanced packages. The prices for these packages can range from relatively inexpensive to almost $1,000 depending on which features you choose.
In the long run, as a new business or even as an existing business having an automated cooking business accounting system can help you to run your business more cost effectively and profitably.
For information about cooking business accounting click on the link to ehow.com
For a demonstration of food service accounting software click on the link to planyourprofit.com For some great information on starting a cooking business including cooking business accounting a great reference is:
• Restaurant and More by Entrepreneur Magazine
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