Accountability and transparency are required in financial dealings. You’ll need to be able to keep track of how much you spend vs how much you make. You can’t tell if you’re earning a profit or not without this general ledger. This will be the foundation for your company’s financial situation. It will keep track of your company’s profits, losses, assets, liabilities, and all other financial transactions. While any simple spreadsheet application, such as MS Excel, can be used to generate a general ledger, there are a number of tools that can be downloaded or purchased that were expressly designed for this purpose.
- You’ll need to enter your company’s information into the software. This ensures that your firm is the only one with access to that software, and that any data included within will be ascribed solely to your company. When dealing with banks or other businesses, this will be very vital.
- After that, you’ll need to make a chart that highlights your company’s various accounts. Make sure you label everything correctly in this phase. You’ll need to figure out what your company’s assets and liabilities are, separate your revenue sources from your expenses, and identify your profits and losses. While this may appear to be a difficult process at first, most software includes sample data that you may utilize to have a better understanding of the software.
- You can usually add sub-accounts to the software of the general ledger if you want more extensive and exact information. This will enable you to determine which aspects of your performance can be improved. Instead of having a single line item for “vehicle upkeep,” for example, you can divide it down into distinct components like “fuel,” “crew allowance,” “toll costs,” and so on. Later on, this will aid you in your financial planning and budget meetings.
- By adding account codes, you can keep your information safe. Through the use of these account codes, your organization will be able to trace transactions. Remove any pre-programmed account codes from the pre-installed software: you want to keep things as safe as possible.
- Begin by entering the fiscal year’s opening balance. This is a crucial stage that must not be overlooked. Your initial balance will serve as a reference point for determining if your company is making a substantial profit, losing money, or just breaking even. Your opening balance will determine the accuracy of financial estimates regarding your organization.
- Have a backup program to act as a check and balance for the main ledger software you intend to use. While you’re testing out the software, it’s advisable to adhere to a manual way first (if possible). You’ll want to adopt the new software as soon as possible after checking its accuracy and reliability, and after allowing staff ample time to become acclimated to it.
While keeping track of the books and accounts may appear to be a tedious task, you must persevere. You won’t be able to keep track of your company’s profit margins unless you have this, and you won’t be able to make reliable financial analyses or forecasts about its state without it.