Businessman analyzes reports and data
Whether you're handling your own accounting or you're planning to outsource the task, it's crucial to establish good accounting practices from the very beginning. — Getty Images/ridvan_celik

Accounting is a critical business task that every company has to contend with, regardless of industry, business model or sales method. Setting up your accounting correctly from the very beginning will save you a lot of headaches and hassle as you grow.

"You need to sit with a lawyer and CPA [and make] a plan," said Paul Miller, CPA and managing partner of Miller and Company LLP. "Which software am I going to use? Who is going to do the bookkeeping? Should I outsource it or is my CPA doing it?"

To help you answer all these questions and more, here is a step-by-step guide to establishing your business accounting processes and setting yourself up for financial success in the future.

Accounting 101: How to set up your business accounting

Open a business bank account

Before you can begin thinking about your business's accounting practices, you'll want to open a dedicated business bank account and/or credit card, if you don't already have one. It's tempting to mix business and personal finances, especially if you're a sole proprietor, but keeping those finances separate will make it much easier to keep track of your income and expenses when tax time comes.

Miller advised choosing a bank with a good reputation for its small business services so you can establish a long-term vendor relationship.

"[Ask yourself], how well do they treat new businesses? What is my potential to get a loan from them? Who is going to be my credit card processor?" he told CO—.

[Read more: How to Open a Business Bank Account]

You need to sit with a lawyer and CPA [and make] a plan.

Paul Miller, CPA and managing partner of Miller and Company LLP

Select an accounting method

There are two primary methods of tracking your business income and expenses: cash basis and accrual basis.

Many small businesses choose the cash accounting method because it's simpler: Income is recorded when a customer makes a payment, and expenses are recorded when you incur them. The accrual accounting method, on the other hand, requires you to record income when you invoice your customer, regardless of when they actually make a payment.

Each method has its pros and cons, and if your business earns less than $25 million in revenue, you can choose whichever one suits you best (businesses must use the accrual method beyond the $25 million mark). It's important to choose carefully, though, as you will need to stick with the same accounting method from year to year when you file your tax return.

Choose your accounting software program(s)

Nearly every modern business uses some kind of accounting software to keep track of its income and expenses. While you can use spreadsheets or paper ledgers, these methods require a lot more manual effort, which increases your chances of making a mistake.

Today's accounting software programs are often affordable, user-friendly and come with convenient integrations and automation features to streamline your accounting processes. Your two main options are desktop-based downloadable programs or cloud-based software-as-a-service (SaaS) programs.

When choosing an accounting software, look for one that can grow with your business and offer top-notch customer service when you have questions or concerns. All-in-one accounting solutions that offer bookkeeping, invoicing, payroll, tax support and other features are great if you want the most value for your subscription price; however, you may want to invest in separate programs for invoicing or payroll if you need more robust help.

"I recommend outsourcing [payroll], especially in the beginning," Miller noted. "Go with ADP or a similar service [to get] all the insurance and registrations taken care of."

[Read more: 10 Free Accounting Tools for Your Small Business]

Set up your chart of accounts

To keep your business finances organized, you'll need to categorize each transaction within your chart of accounts (COA). At the highest level, your income and expenses can be broken up into assets, liabilities, revenues, expenses and equity.

Each of these "accounts" can be further divided into sub-accounts to help you better track your money. For instance, your expenses account may have multiple sub-accounts like advertising, office supplies, employee wages, payroll taxes, software subscriptions and more.

Any tax professional who helps your business will want to see your transactions categorized in this way, so it's good to get in the habit of organizing your finances into accounts early on in your business.

Schedule time each week or month to review your finances and reconcile your accounts (or hire a professional to do it for you)

Laying the foundation for your business accounting is only half the battle. Once your software and accounts are set up, you'll need to continually monitor your finances and ensure that every transaction has been properly recorded and categorized. Even if you use an automatic transaction import feature, you'll still want to set aside time each month to review and reconcile your business's financial accounts and ensure nothing was omitted or miscategorized.

Of course, you don't have to handle this task by yourself. If you don't have the budget to hire an in-house accountant or financial manager, you can outsource your bookkeeping and payroll needs to a specialized firm or consult with a financial adviser.

"You need to get the right legal and accounting advice before you launch your business," said Miller. "There are many [financial] items that need to be addressed … and it would be optimal if you have a person who can help you with all your needs."

[Read: A Guide to Small Business Accounting]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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