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Fearless Accounting with Wave

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Fearless Accounting with Wave Fearless accounting with Wave Master your accounting and steer your business to success with the world’s most popular free accounting software. Copyright © 2018 Wave Financial Inc. Unlimited copying, redistribution, and use of this guide in its original format is permitted for educational purposes, and for the purpose of assisting business owners in their use of Wave within their business. Sub-sections of this guide, and/or the concepts and explanations herein, may be reproduced and distributed subject to the condition that the original source is attributed to Wave Financial Inc, and a link or reference provided to Wave at https://waveapps.com. Notwithstanding the above, no part of this guide, nor the concepts or explanations herein, may be reproduced, repurposed, or redistributed in connection with, or for the purpose of promoting the use of any other accounting or financial software or service. Disclaimer Wave Financial Inc. has provided this guide to assist business owners in maintaining and understanding their own management accounts using Wave’s online financial tools and services. The activities and methods set out in this guide are not intended to be used for statutory financial reporting or tax calculation and Wave Financial Inc. makes no representation as to their suitability for these purposes in any jurisdiction. While Wave Financial Inc. has taken reasonable care to ensure the accuracy of information in this guide, it is provided as-is and without warranty as to the suitability of the content for any individual business. Wave Financial Inc., together with its Directors, Officers and employees, accept no liability for any direct or indirect financial or economic loss that may arise as a consequence of using this guide. 1 We’re glad you’re here! Welcome to Wave’s Fearless Accounting guide, and congratulations on opening a document that says “Accounting” on the front! We know that accounting – like math – is a topic that most people were turned off from before they even left school, but hopefully this guide will show you not just how easy it is to look after your own accounting in Wave, but also how having a good grasp of your numbers helps you understand and improve your business. Of course, you can have someone else do your bookkeeping, but we firmly believe that – at least until your business grows so successful you have no time for it – the benefits that flow from looking after your own books more than justify the effort of learning how! The Wave Customer Success Team 2 About this guide This guide is designed to be read Good accounting and bookkeeping practices “But I don’t know anything about once, and referred to often. have a natural rhythm. accounting!” You need to set up your accounts before If that’s you, don’t be concerned. We’ll Seriously, you’ll get the most benefit you can use them. Once that’s done, there quickly cover the basic accounting concepts if you read it all the way through, are some routine tasks you’ll probably want that will help you use Wave successfully. to perform daily; others weekly; and others starting at the beginning, and But goal is not just to show you how to use monthly, or even quarterly. continuing to the very end! Wave; we want to make you comfortable Finally, once a year, you’ll need to complete using financial information to understand Here’s the good news, though: you year-end tasks to be ready for tax time. your business, make better decisions, and become more successful. don’t need to read it all in one go! We’ve designed this Fearless Accounting guide to follow a similar cycle. Start by So when you get to the Accounting coffee reading just what you need to get set up break sections – grab a coffee! Give correctly; then learn the simple tasks you’ll yourself a few minutes to gain true perform daily or weekly in Wave. Later, you’ll understanding of accounting concepts and discover best practices to follow monthly tools that help ensure your success in Wave, and quarterly. Save learning about year-end and in your business! tasks for, well, the end of the year! If you jump to the end of this guide, you’ll Ready to do this? Let’s go! find a comprehensive checklist of every task covered here. Print it out and keep it somewhere handy. It’s your to-do list for staying in control of your accounting, and your business. 3 The sections below cover a lot of content. To track where you are, refer to Table of contents the icon on the top right corner of each, and use the checkbox next to it to record your progress. page page page page page 5 16 24 29 43 Accounting coffee break: Putting it into action: Accounting coffee break: Putting it into action: Accounting coffee break: The 10,000 foot view Getting set up Why the balance sheet Daily to weekly tasks Journals and ledgers balances page page page page page 48 55 62 78 87 Accounting coffee break: Analyzing your business: Putting it into action: Accounting coffee break: Put it into action: Understanding debits & Interpret your financial Weekly to monthly tasks Your business over time Monthly + quarterly tasks credits statements page page 97 111 Year-end accounting Comprehensive checklist 4 ACCOUNTING COFFEE BREAK #1 The 10,000 foot view Check off your Three reasons to progress as you go! keep accounts Compliance Account to owners Understand & grow your business If you run a business, you need to You’re probably reading this guide to This is the main focus of our guide, and report your income and pay taxes. tackle the accounting for your own we believe it is the best and most Depending upon where you operate business, but another important reason compelling reason to gain a solid your business, and what business many businesses need proper understanding of fundamental structure you adopt, you may also need accounts is to account to owners. In accounting concepts, and to handle your to file accounts that are available for any incorporated business with own management accounting. official or even public inspection. The investors, in any partnership, and any law requires you to keep appropriate private business where managers are Being in charge of your numbers means accounts of your business transactions, employed to look after day-to-day being in charge of your business, and that so that the man can get his piece of the operations, the owners need to know gives you the power to plan a path to action. what is being done with their money, success. and how it is generating profits. 6 Let’s repeat that. Financial accounting takes your Management management accounting records and The main focus of this guide is to re-purposes them to report your tax accounting, provide you the accounting knowledge liabilities, and to file information and you need to understand and grow your make reports to owners in compliance business, and the practical steps and with applicable laws and standards. It not financial skills in Wave to handle your own is about complying with local management accounting. regulations where you operate your accounting This is super important. Management business. accounting is mostly intuitive, easy to Financial accounting is not easy to learn, and the same wherever in the learn, which is why your CPA spent so world you run your business. long in school, and charges you so Management accounting is about much! documenting how your business Here’s the good news: just about works, so you see early warning signs everything you need in order to of problems, and clear insight into understand your business and be more opportunities. successful falls under management Every business owner can and should accounting. And not only is it fine to master the basics of management leave your business’ financial reporting accounting – it won’t be hard to learn, to your accountant (seriously - do and it will make you more successful. this!), his or her services will be much less expensive if you have your core management accounting records in good order. 7 The balance sheet and income statement (aka “P&L”) If you were exposed to any accounting At the risk of repeating ourselves, as a classes at school or college, or have small business owner you keep dipped into other accounting books, accounts to better understand your you may have painful memories of business, and the two most important T accounts, journal transactions, and financial statements that you’ll rely on debit-credit theory. - the ‘end’, or output of your work - are your balance sheet and your income Well, we may meet some of that along statement (also known as your profit the way, but let’s start in a more and loss report). sensible place: at the end! So let’s dive straight in and take a look at how these actually work, using just one sheet of paper… 8 Imagine for a moment there are What I have What I earn no easy, free accounting systems like Wave. Instead, we’re going to What my business has What my business makes give you one sheet of paper to track your business. To help you get started, though, we’ll add a few headings: On the left, we’ve made space to list out “What I have.” That’s made up of three less What my business owes less What my business spends sections: 1. What my business has 2. (take away) What my business owes 3. (equals) What’s left for me On the right, we’ve made space to list out “What I earn”.
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