12th October, 2023
A general ledger is a critical component of business accounting.
It is the main ledger that summarises all transactions and financial events for a company.
The general ledger provides a comprehensive record of all debit and credit account balances, which are used to generate important financial statements.
For small businesses, maintaining your general ledger is crucial for managing finances and having visibility into the health of your operations.
Thankfully, cloud-based accounting software has made it easier than ever for small businesses to set up and manage a general ledger.
With accounting software, businesses can both access and manage accounting data from different sources and locations into one system of record.
When setting up your general ledger, one of the most important steps is establishing your chart of accounts.
This is the structure of accounts you will use to categorise transactions and organise your finances.
For any business, your chart of accounts should include accounts for major categories like assets, liabilities, equity, revenues and expenses.
However, your account types should also be tailored to your specific business activities.
For example, an e-commerce company would need dedicated accounts for things like:
Take time to think through all of the accounts you will need to track inbound and outbound transactions for your business.
The key is setting up your chart of accounts to provide the transaction classification details you need for reporting and analysing your finances.
Consider how your business might grow when setting up your accounts. For example, numbering your accounts in a way that allows you to scale to multiple divisions or locations.
We’ve partnered with Amaka to provide accounting integrations that can automate the process of creating accounts specific to e-commerce sales by connecting your e-commerce platform to MYOB.
Then, it will automatically sync sales transactions into the relevant accounts. If you have existing accounts, you can use these and customise the account mapping.
Related: How to set up your chart of accounts for e-commerce businesses
To maintain accuracy in your general ledger, it is critical to perform regular account reconciliations.
This involves verifying account balances match supporting documentation like bank statements, supplier invoices, and other transaction records.
Frequent reconciliations help identify any discrepancies that could indicate omitted or duplicate transactions.
Cloud-based accounting systems make it easy to automate reconciliations for accounts like bank and credit card accounts.
Yonatan Bley, MYOB’s Head of Product Marketing explains, “We allow users to connect their financial institution to automatically import statement data records.
“The transactions can then be reconciled, ensuring your cash accounts match the bank. Taking advantage of automated reconciliation features reduces manual work while giving assurance that account balances are up-to-date and error-free.
“For e-commerce businesses, Amaka’s accounting integrations automatically account for sales and fees with payouts reconciliation which means you don’t need to manually match up each of these transactions to your bank statement.”
Make sure you use simple regular practices to maintain accuracy when reconciling general ledgers. This includes tasks like:
Conducting periodic audits where you compare general ledger totals to your trial balance can help identify potential issues to address.
Make sure you archive old ledgers for record-keeping purposes after closing out yearly accounting periods, while keeping the current general ledger file active.
Making these maintenance procedures part of your regular accounting workflow will improve the integrity of your general ledger data for more reliable financial reporting.
MYOB offers automated reconciliation for accounts like bank and credit cards to significantly reduce time needed for these processes. Finally, software audit trail reports provide transparency, making any unauthorised changes easy to identify.
Yonatan Bley, MYOB’s Head of Product Marketing
Having an accurate, well-maintained general ledger is imperative for e-commerce businesses.
The ledger directly impacts the quality of financial statements and reports that guide critical business decisions.
Make sure you perform thorough account reconciliations and follow best practices for ledger upkeep to identify and correct errors or discrepancies.
This disciplined approach to general ledger maintenance preserves the accuracy of the ledger over time.
Regularly reconciling accounts and taking preventative maintenance steps ensures the general ledger remains the reliable, centralised source of information on a company’s financial position.
With an organised and precise general ledger, businesses can confidently use their accounting data for analysis, planning and strategy.
Modern accounting software provides tools that can optimise general ledger maintenance.
“Cloud-based accounting platforms enable remote access so accounting staff can collaborate on ledger upkeep from multiple locations,” Bley says.
“On top of that, MYOB offers automated reconciliation for accounts like bank and credit cards to significantly reduce time needed for these processes. Finally, software audit trail reports provide transparency, making any unauthorised changes easy to identify.”
With the right technology in place, mundane ledger maintenance tasks can be reduced or eliminated so accounting teams can focus their time on more strategic initiatives.
Modern accounting systems remove much of the manual effort traditionally required to keep general ledgers organised and up-to-date.
With the right knowledge and systems in place, you’ll be able to handle general ledger maintenance simply.
By applying these tips and utilising the right automation tools, you’ll be able to maintain best practices in your accounting.
Through using a cloud-based accounting software and conducting regular reconciliations, you’ll continue to be compliant and regularly see your business operations are running smoothly.
A version of this article first appeared here.
