Financial transactions demand accountability and transparency. You will need to be able to track how much you are spending versus how much you are earning. Without this general ledger, you cannot determine whether or not you are making a profit. This will serve as the basis for the financial status of your company. It will track your profits, losses, assets, liabilities and all other financial transactions entered by your company. While this can be done with any simple spreadsheet program like MS Excel, there are a lot of programs, which can be downloaded or bought, that were specifically created for building a general ledger.
- You will need to place your company data in the software. This will ensure that your company is the only one with access to that particular software and that any data within will be attributed to your company alone. This will be particularly important when dealing with banks or other companies.
- After doing so, you will have to create a chart highlighting the different accounts of your company. In this step, make sure you categorize everything appropriately. You will have to determine which are your company’s assets and liabilities, differentiate your sources of revenue from your expenses, and define your company’s gains and losses. While this may seem like an initially daunting task, most software comes with sample data that you can use to better understand the software.
- If you want to have records that are more detailed and precise, you can usually add sub-accounts to the software of the general ledger. This will allow you to determine which things you can further improve on. For example, instead of just having one line item for “vehicle maintenance”, you can break it down into individual components such as “fuel”, “crew allowance”, “toll fees”, etc. This will help you in your financial planning and budget meetings later on.
- Keep your information secure by adding account codes. Your company will be able to track the transactions through accessing these account codes. Delete any preset account codes from the pre-installed software: you want things to be as secure as possible when doing this.
- Start by entering the opening balance for the fiscal year. This is a fundamental step that cannot be forgotten. You will need your opening balance as an anchor to determine whether or not your company is posting a significant profit, losing money, or just breaking even. The accuracy of financial predictions about your company will depend on your opening balance.
- Have another program as backup to serve as a check and balance to the main ledger software you plan on choosing. It is best to stick to a manual method first (if possible) while you are checking out the software. After verifying its accuracy and its reliability, and after giving employees enough time to get used to the new software, you will want to implement it as early as you can.
While keeping track of the books and the accounts may seem like a lot of boring work, you will have to stick to it. Without this, there is no way you can keep track of the profit margins of your company, nor can you make accurate an financial analysis or predictions about the state of your company.