Accounting means calculating the financial results of a company. As you are mostly piloting and testing their ideas the normal accounting does not give that much relevant information on how the company is developing, since it only measures financial results.
It is still important to understand how companies follow the financial results and track them.
First do the bookkeeping.
Bookkeeping refers the (often manual) task of recording the financial transactions (money in and money out) and accounting is the part where you sum them up.
NY Start Up companies need to do bookkeeping of their financial activities. If you use the Holvi.com service it basically takes care of your manual bookkeeping and you can just read the reports of money in and money out. But if you need to create an bookkeeping and then accounting document by your self here is the template for that:
How to do plan accounting and bookkeeping
Define your Income / Expenses
You usually track how much you have sold and how much money you have spent. You can also decide how much more you want to know. For example:
- You have two products. Do you want to know how much money each product has generated or are you happy with total amount?
- Do you want to know how much money is spent on marketing, materials and travelling or is it enough to know total amount of money used?
There is no absolutely right choice on what to track but please think what do you want to know and what’s relevant. The more you want to track the more complicated the accounting gets.
We would recommend tracking for example sales per pilot product and material, marketing and travel expenses but you can track more if you feel the need for it.
Learn how to fill up the accounting template for tracking and do it
Filling up the template is dead easy – once you know what you are doing. See the image and explanation below
- Every time you buy something for the company you create accounting event, so this is just a number of event. If you have receipt of the bill, you can write the event number to receipt to make it clear where the receipt belongs.
- When did you buy / sell something.
- Short description what happened or what was bought.
Mark the amount to the account lines! (click the image to see whole image).
This is the tricky part… you need to tell where the expense or income belongs and what happened.
For example event #2:
You bought supplies…
- Money went out of the bank account
- Material came in to your company
You sold product in event..
- Money came in to your bank account
- Sales went out of your company
Thats basically it. When you are done, just check the reports -sheet to see the total amount of sales, expenses and profit for your company.
Learn what is profit & loss statement in accounting
When you have done your bookkeeping you will get profit and loss statement that tells the total sales and expenses of your company. Previously accounting was a tedious job of calculating (by hand) all the numbers together, but luckily we have software for that.
See the video in Youtube. This will explain the Profit and loss pretty well.