Bookkeeping Software Setup
Choose bookkeeping software (QuickBooks Online, Xero, or Wave are common). Below are step-by-step setup instructions you can follow for any of them, plus decision points and examples. Pick the product you’ll use and follow the relevant steps.
Initial decisions (before you start)
Choose software based on business size and needs:
QuickBooks Online: best for growing small–medium businesses, strong payroll & app ecosystem.
Xero: good for accountants/bookkeepers, multi-currency and bank reconciliation.
Wave: free core features, suitable for sole proprietors and very small businesses.
Determine fiscal year start, accounting method (cash vs. accrual), and business structure (sole proprietorship, LLC, S-Corp) — these affect tax settings and payroll.
Gather documents: Employer Identification Number (EIN), bank account info, past year’s financials (P&L, balance sheet), payroll tax account numbers, vendor/customer lists, and recent statements.
Account Settings — essential configuration
Company profile
Company name, legal name, EIN/tax ID, business address, phone, email.
Fiscal year start and reporting currency.
Industry/north american industry classification (if requested).
Accounting preferences
Accounting method: select cash or accrual.
First month of fiscal year and closing period settings.
Default starting balances date (choose day before you begin entering opening balances).
Numbers and formats
Default invoice numbering, receipt and bill numbering formats.
Sales tax reporting frequency and default tax agency.
Default bank deposit and payment terms (net 30, net 15) and default invoice email templates.
Users, roles & access
Create admin account(s), accountant/bookkeeper access, payroll admin, and limited users.
Apply role-based permissions: who can view payroll, who can edit chart of accounts, who can invite new users.
Connected apps & integrations
Connect bank(s) and credit card accounts (enable daily import).
Connect payment processor (Stripe, PayPal) to record receipts.
Add receipt-scanning app (native or third-party) for expense capture.
Chart of Accounts — setup and best practices
Start with a clean template
Use the software’s standard template for your industry, then customize.
Core account types (examples and numbering)
Assets (1000–1999): Cash on hand, Checking (1010), Savings (1020), Accounts Receivable (1200), Inventory (1300), Prepaid Expenses (1400), Fixed Assets (1500).
Liabilities (2000–2999): Accounts Payable (2000), Credit Card (2100), Sales Tax Payable (2200), Payroll Liabilities (2300), Loans Payable (2400).
Equity (3000–3999): Owner’s Capital (3100), Retained Earnings (3200), Owner’s Draw (3300).
Income (4000–4999): Sales - Products (4100), Sales - Services (4200), Discounts & Returns (4250).
Cost of Goods Sold (5000–5999): COGS - Materials (5100), COGS - Labor (5200).
Expenses (6000–7999): Rent (6100), Payroll Expense (6200), Utilities (6300), Advertising (6400), Office Supplies (6500), Depreciation (6600), Bank Fees (6700).
Keep accounts specific but not too granular
Group small recurring items under a single expense account until you need more detail.
Numbering system
Use a consistent numbering system so accounts sort logically and are easy to expand.
Closing and retained earnings
Confirm how retained earnings are handled at setup. Set beginning balances to move into retained earnings if needed.
Opening balances and beginning-of-period tasks
Set a start date (often first day of your fiscal year or the date you begin using the software).
Enter opening balances:
Bank and credit card balances as of start date.
Accounts receivable and payable (open invoices and bills) if you want aging reports to be accurate.
Fixed assets with cost, accumulated depreciation, and acquisition dates.
Equity: opening retained earnings/owner’s equity balances.
If migrating from prior accounting, consider doing a trial balance import or reconciled closing balance import.
Choose bookkeeping software (QuickBooks Online, Xero, or Wave are common). Below are step-by-step setup instructions you can follow for any of them, plus decision points and examples. Pick the product you’ll use and follow the relevant steps.
Initial decisions (before you start)
Choose software based on business size and needs:
QuickBooks Online: best for growing small–medium businesses, strong payroll & app ecosystem.
Xero: good for accountants/bookkeepers, multi-currency and bank reconciliation.
Wave: free core features, suitable for sole proprietors and very small businesses.
Determine fiscal year start, accounting method (cash vs. accrual), and business structure (sole proprietorship, LLC, S-Corp) — these affect tax settings and payroll.
Gather documents: Employer Identification Number (EIN), bank account info, past year’s financials (P&L, balance sheet), payroll tax account numbers, vendor/customer lists, and recent statements.
Account Settings — essential configuration
Company profile
Company name, legal name, EIN/tax ID, business address, phone, email.
Fiscal year start and reporting currency.
Industry/north american industry classification (if requested).
Accounting preferences
Accounting method: select cash or accrual.
First month of fiscal year and closing period settings.
Default starting balances date (choose day before you begin entering opening balances).
Numbers and formats
Default invoice numbering, receipt and bill numbering formats.
Sales tax reporting frequency and default tax agency.
Default bank deposit and payment terms (net 30, net 15) and default invoice email templates.
Users, roles & access
Create admin account(s), accountant/bookkeeper access, payroll admin, and limited users.
Apply role-based permissions: who can view payroll, who can edit chart of accounts, who can invite new users.
Connected apps & integrations
Connect bank(s) and credit card accounts (enable daily import).
Connect payment processor (Stripe, PayPal) to record receipts.
Add receipt-scanning app (native or third-party) for expense capture.
Chart of Accounts — setup and best practices
Start with a clean template
Use the software’s standard template for your industry, then customize.
Core account types (examples and numbering)
Assets (1000–1999): Cash on hand, Checking (1010), Savings (1020), Accounts Receivable (1200), Inventory (1300), Prepaid Expenses (1400), Fixed Assets (1500).
Liabilities (2000–2999): Accounts Payable (2000), Credit Card (2100), Sales Tax Payable (2200), Payroll Liabilities (2300), Loans Payable (2400).
Equity (3000–3999): Owner’s Capital (3100), Retained Earnings (3200), Owner’s Draw (3300).
Income (4000–4999): Sales - Products (4100), Sales - Services (4200), Discounts & Returns (4250).
Cost of Goods Sold (5000–5999): COGS - Materials (5100), COGS - Labor (5200).
Expenses (6000–7999): Rent (6100), Payroll Expense (6200), Utilities (6300), Advertising (6400), Office Supplies (6500), Depreciation (6600), Bank Fees (6700).
Keep accounts specific but not too granular
Group small recurring items under a single expense account until you need more detail.
Numbering system
Use a consistent numbering system so accounts sort logically and are easy to expand.
Closing and retained earnings
Confirm how retained earnings are handled at setup. Set beginning balances to move into retained earnings if needed.
Opening balances and beginning-of-period tasks
Set a start date (often first day of your fiscal year or the date you begin using the software).
Enter opening balances:
Bank and credit card balances as of start date.
Accounts receivable and payable (open invoices and bills) if you want aging reports to be accurate.
Fixed assets with cost, accumulated depreciation, and acquisition dates.
Equity: opening retained earnings/owner’s equity balances.
If migrating from prior accounting, consider doing a trial balance import or reconciled closing balance import.