If your business sells 5 products lines, set up your books to show income for each one. At the end of the month you will be able to use this information to make decisions. Sometimes we think one product will be the top seller and the demand turns out to be different.
The same is true with costs. If you have sales information for each product, it makes sense to have a cost for each one.
Maybe you sell too many types of product to log them this way. Maybe breaking sales down by customer or splitting online sales from shop sales is more helpful. The point is about thinking what you would find helpful when making decisions and make sure that your bookkeeping will answer the questions for you each month.
You need to know what your accounting period is before you start. For a company, your year end could be any month whereas for self employed people it is always sensible to pick the end of the tax year. If you are not sure about your accounting period, get some advice from a bookkeeper or accountant before you start. Some software packages will not allow you to change the dates once you have set them up.
You need to know whether you are or should be registered for VAT as this will effect every part of the bookkeeping process. If you are not VAT registered, you must not separate our the VAT element when you are recording invoices.
If you are not VAT registered, but your turnover is getting close to the VAT threshold, it would be worth asking your accountant or a bookkeeper how you should monitor your turnover. There are fines for not registering when you should do and the calculations are not quite as straightforward at looking at your year end figures.
Bookkeeping is not for everyone, some people really want to feel they own their numbers, that they understand the figures inside out. Some people are amazing at generating sales, but simply can not get their head around the number work.
Setting up a simple system is key but if numbers are not for you, get a bookkeeper to help!
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I learned more about how to direct my business in 20 minutes talking to Jen at BW Bookkeeping than in 4 years of meetings with my accountant.
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