Accounting and recordkeeping are not necessarily that difficult or time-consuming for an emerging business. Most entrepreneurs – except those seeking venture funding – are free to adopt any accounting system that makes sense and is easy to use.
The corporate terminology may sound intimidating. But when you keep in mind that an “operating budget” is basically the same as a household budget with a few different line items; a “cash disbursement journal” may be as simple as a checkbook register; and a “financial statement” only requires minor reformatting of your budget… then it all begins to sound a lot more manageable.
The benefits of creating a workable system of accounting and recordkeeping are considerable. Budgeting gives you visibility into your cash flow – how much is coming in and how much is going out – each month. Managing cash flow is essential to keeping the doors open. Second, you can’t plan for growth unless you have a handle on income and expenses. And third, if you need to get a loan, your banker will want to see your books. Therefore, it’s a good idea to learn how to meet that expectation.