10 Steps To Help You Set Up Your New Accounting Software (2020)
Updated: Oct 16, 2020
Okay, so you have found a great new software to keep your books or you have finally moved your bookkeeping off of excel. Either way -- yay!
Keep in mind, your profit and loss account does not roll over into the next year, but your balance sheet does.
Here are 10 steps to make sure your accounts are set up appropriately:
1. Your bank balances should be the first, and easiest, to input. Get the balance from your bank statements for the day before the first day of the year. (I.e. if your tax year starts January 1st 2020, you're looking for December 31st 2019 balances)
2. Input any assets you have. This should be the sales value of the asset on December 31st, so if you have owned it for a few years, make sure to account for depreciation.
3. Input any outstanding debt you owe. This will include your credit card (completed in step 1), but also includes any loans you may have taken out. Work out how much you owe (in capital- not including interest) on December 31st, and input this value.
4. Input your debtors. These are people that you have provided a service for, or given a good to, that have not yet paid you, but owe you. This can be tricky to determine, but try to keep it as accurate as possible in order to have a good view of your business. On a software like Xero, you can input all of your invoices outstanding into their system, and they will calculate the total for you.
5. Input your creditors. This is the opposite of your debtors. They are people that you owe, because they have provided you with something and you haven't paid yet. Similarly to debtors, you can input all of your outstanding bills received in December, and Xero (or your accounting software) will add them up for you.
6. Add in any other assets/liabilities your company may have. Maybe you've loaned yourself personal money, in which case record this as an asset. Or perhaps you've used your personal money to loan to your business, in which case record this as a liability.
7. Most accounting softwares will have a chart of accounts. This is all of the standard nominals you will need. If you have specific revenue streams you want to split out (e.g. online sales vs store sales), or expense categories you'd like to see (e.g. Stripe Fees), create these now to save yourself time. This is personal choice and there are no rules to this.
8. If you are VAT registered- input all of your VAT information to your accounting software. This will save you time in the future and your software should do a lot of the calculation for you.
9. Similarly, if you are using payroll, set this up within your accounting software too. This makes month end payroll journals a lot easier and more efficient.
10. Keep in mind that assets = liabilities + equity. So whatever your balance is, is your equity or retained earnings. If you've paid yourself dividend in the life of your business, record this now.
If this is the start of your business, your balance sheet will likely be pretty bare. Don't worry, it'll soon fill up over time as you start working on your business! If this is a transfer to a new software, make sure to check your balance sheet back to the balance sheet you submitted to HMRC. This will ensure everything is accurate, and set you up for a great bookkeeping year! Should you need any help setting up, we can help you for a flat £50. Send us an email at firstname.lastname@example.org for more details!