Accounting.  Dreaded accounting.

You don’t want to do it.  You don’t know how to do it.  You just want to live your dream and do what you’re good at.  I get it.  I understand.

For many entrepreneurs, they know good accounting is important, it’s just not urgent and it’s very easy to put off until “tomorrow.”  And unless your small business is accounting or bookkeeping, you probably don’t get a thrill from doing your books.

But it’s vitally important that you do.  Cash flow is the lifeblood of a small business!  Understanding where your money is coming from and going to will help you understand how to become more profitable more quickly.  You need to understand your biggest money-makers, your biggest expenses, and how things are shaking out in the end.

So here are five systems to help you do just that, from most basic to most complex or full-featured.

1) Your Checking Account Register – If you’re just starting out a small business from scratch, this method is acceptable for the first year or so.  I’m talking cottage-industry here; a business you do from home or on the side of your full-time job.  If you’re going all-in with a storefront or 40 hours/week, you need a more robust solution.

This method won’t categorize expenses and won’t give you a detailed Profit & Loss or Balance Sheet, but it will show you if you’re making any money.  Is there money in the account?  Then you’re on the right track!  Like I said, this is only a temporary solution.

2) Microsoft Excel or Apple Numbers

Unknown-12 Numbers

This is probably my least favorite option, but you can make it work.  If you want a solution that can scale with you, has complete customizability, will not cost you anything (if you already have the software), and have the requisite knowledge and skill, you can use a spreadsheet program like Microsoft Excel or Apple’s iWork Numbers.

Many banks allow you to download transactions in a compatible format for a spreadsheet program, usually comma-delimited (.csv).  With Excel or Numbers you can completely customize the interface you use, make charts, graphs, and reports, and not worry about having to pay anything.  It may be right for some people (especially if you’re just starting your business and have lots of experience with either program), but I like this option the least because it’s the most labor-intensive as you grow.

3) Outright (now GoDaddy Online Bookkeeping)
outright-logo

Outright was recently purchased by GoDaddy.com, the URL and web service provider.  After its acquisition it is still a solid, basic, simple option for small business bookkeeping.  Outright connects straight to your bank account and imports transactions from there.  It’s similar to the personal finance solution Mint.com in that regard.  Outright is also similar to Mint in the fact that it has a free option.

After it imports transactions, it categorizes them for you, but this isn’t an exact science.  You still have to go back through and categorize them properly sometimes.  This is also the first system that automatically generates reports for you based off the information it has, namely the Profit & Loss statement, but also expense and income breakdowns.

The cons to Outright are that it is less robust than the other, more complex options I’ll cover on Wednesday.  It just doesn’t have as many options and features, which could actually be a strength for some people.  It does have invoicing with its paid plan, a reasonable $9.95/month subscription.  It’s also in the cloud, a big plus in my book.

Check out Part 2 on Wednesday, where I’ll break down a couple of the of the major players in this category!