Small Business Accounting Setup Tool (USA)

This tool helps you think through fundamental accounting decisions for your small business in the U.S. Your choices impact how you track income and expenses, file taxes, and understand your business's financial health.

This is an informational tool to guide your thinking, not a substitute for professional accounting or tax advice.

Business Basics

1. What is your business's legal structure (entity type)?

2. What type of business or industry are you in?

Consider if you sell products (inventory) or primarily provide services.

3. What is your estimated annual gross revenue?

Accounting Method (Tax Basis)

4. Which accounting method (tax basis) do you plan to use?

This determines when you recognize income and expenses for tax purposes. Note that certain businesses (especially with inventory or over $25M revenue) may be required to use the Accrual method.

5. Do you plan to track accounts receivable (money owed to you by customers)?

6. Do you plan to track accounts payable (money you owe to vendors/suppliers)?

Chart of Accounts

7. How detailed do you need your expense tracking to be?

A detailed Chart of Accounts allows for granular reporting (e.g., separating software expenses from office supplies). Simple means grouping expenses into broad categories.

8. Do you need to track inventory value as an asset?

Relevant if you sell products. This affects Cost of Goods Sold calculation.

Accounting System / Software

9. What type of system do you plan to use for your accounting?

10. Do you need integrated features like invoicing, payroll, or bank reconciliation?

Common features in accounting software.

Record Keeping

11. How do you plan to store your financial records (receipts, invoices, bank statements)?

12. How often do you plan to review and update your accounting records?

Regularity is key for accuracy and timely reporting.

Small Business Accounting Setup Summary

This summary reflects your choices regarding your accounting setup and provides general considerations based on common practices.

Your Setup Choices and Considerations:

Setting up a robust accounting system from day one is vital for any small business in the USA. It ensures financial clarity, simplifies tax reporting, and supports smart decision-making. Our free Small Business Accounting Setup Tool provides a comprehensive guide to help you establish the right financial foundation.

Essential steps for your accounting setup include:

  • Separate Finances: Open dedicated business bank accounts and credit cards to keep personal and business transactions entirely separate. This simplifies tax preparation and protects personal assets.

  • Choose Accounting Method: Decide between cash-basis (records income/expenses when cash changes hands) or accrual-basis (records when earned/incurred, regardless of payment). Most small businesses start with cash, but accrual gives a clearer financial picture.

  • Select Software: Choose accounting software (e.g., QuickBooks, Xero, Wave) that fits your budget and needs. It helps categorize transactions, generate reports, and often links directly to bank accounts.

  • Chart of Accounts: Set up a clear system for categorizing all your financial transactions (assets, liabilities, equity, income, expenses).

  • Track Income & Expenses: Implement a routine for recording all money coming in and out, keeping detailed digital or physical receipts.

  • Regular Reconciliation: Monthly, compare your internal records with bank statements to catch errors and ensure accuracy.

  • Understand Tax Obligations: Be aware of federal, state, and local tax requirements, including estimated taxes.

A well-organized accounting system is key to your US small business success.

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