Guide to Setting up a Basic Bookkeeping System

Computerized systems do the math easily and accurately

Most small businesses choose software over manual bookkeeping systems. For about $200 or less, you can get a good package for your startup business. Don't buy a system that's too complex, but also avoid a system that will have to be replaced in two or three years when your business has grown.

I recommend: See reviews and a handy comparison chart of bookkeeping software at ZDNet. GrowMyBusiness.com, 2020software and ToSeekA offer an array of software options.

Paper systems are convenient for very small businesses

If you're just starting your business, a manual, or paper, bookkeeping system may be the way to go.

I recommend: Business Owner's Toolkit has sound, plain-English advice on basic bookkeeping for a small business. You'll find details on the important of good records, accounting system essentials, how to record daily transactions, preparing financing statements and much more. Also check out advice from accounting firm Miller, Bahr & Wills on the basics of a setting up a bookkeeping system for your small business.

Single-entry is simple and straightforward

Single-entry is the simplest way to set up a bookkeeping system. Transactions are listed as a single transaction — not as a debit and credit, as is done in a double-entry system.

I recommend: Infoplease and Ohio State University discuss single- versus double-entry systems. FindArticles details the differences between the two.

Double-entry allows you to track more data

Most larger businesses use double-entry bookkeeping, as single does not give detailed information about the source of the gain or loss. Double-entry bookkeeping gives a business a detailed picture of its true financial position, not just its cash position.

I recommend: Mango discusses the advantages of double-entry bookkeeping.

When in doubt, call in a professional

If all this talk of computers vs. paper and single- vs. double-entry seems daunting, don't hesitate to call in a professional to help you set up or maintain your bookkeeping system. The services can be relatively inexpensive and setting up a good bookkeeping system is critical to the success of your business.

I recommend: Talk to fellow small-business owners for referrals, or find a bookkeeping service in your area through Bookkeepinghelp.com.