10 Simple Steps to Improving your Small Business Bookkeeping and Financial Well-Being
All small businesses have the same issues when it comes to bookkeeping and clear records. Small business owners prefer to be out generating revenue and working on their visions.
Spending countless hours at the end of a long day doing small business bookkeeping is not high on the priority list.
By implementing the following 10 steps you are on your way to simplifying the record keeping.
1. Keep you business and personal finances separate. Set up a bank account and/or credit card account for your business and immediately start using each for its intended purpose. Receipts should be retained and filed accordingly.
2. Create a filing system so that you can track amounts paid by vendor. It is much easier to locate paid receipts when you file by name of the company than it is to file by date.
Each item that is paid should be marked as such to eliminate duplicate payment. Alternatives exist when using computerized systems by using a voucher system which can be attached directly to the paid invoice.
3. Purchase and implement a simple small business accounting program into your daily routine. Product like Quickbooks or Outright.com are relatively inexpensive and when used properly will save you time in the long run and will also help keep your CPA’s bills down
4. Set specific times to work on your finances. This accomplishes several things: it creates a routine and also will keep your record keeping timely. Re-creating or remembering what paid invoices are for several months down the road is not as easy as making a note the day or week that you incur the expense.
5. Obtain and review your Bank statement each and every month. Many business people believe that simply logging into their bank account and reviewing activity is a substitute for reconciling their accounts. Reviewing is important to detect fraud, spot duplicate payments and verify that deposits are properly posted to your account timely. In addition you may spot high fees your bank is charging which may be a sign you are in the wrong account type.
6. Try and be Consistent. Many small business owners start their bookkeeping with every intention to stay up to date, but over time they fail due to time constraints. Properly coding assets and expenses will help you see the true profitability of your business and help you react faster to problems.
7. Don’t forget to track reimbursable expenses. When paying out of pocket costs for your clients, make sure that you track these and bill these back to your clients. Failure to do this will reduce your profit margins and will severely impact your bottom line.
8. Backup your records. Whether you are doing things completely on paper (which sis not advisable) or through a computerized accounting system, you should backup information in order to support any tax deductions you are taking and also to safeguard your data.
If you are not diligent with computer back up, there are some cheap on-line alternatives that will do this for you on a daily basis.
9. Employees vs subcontractors. When bringing on staff or outside consultants there are specific rules that need to be followed. This should be done before hiring either in order to protect yourself down the road. This area is a frequent target of IRS and State Unemployment boards.
10. Make sure your small business bookkeeping systems are set up correctly from the beginning. Consult with your CPA, business coach or outside bookkeeping services who design and implement bookkeeping systems for small business.
These advisors have been through this and addressing your small business bookkeeping issues up front. Putting in proper procedures from day one will benefit you in the short and long term. It is better to invest in a system that works, than to pay to fix it down the road.
_________________________________________________________ About the Author: Edward Becker, CPA, President of Outsource Your Books, LLC. Outsource Your Books provides professional outsourced bookkeeping services to emerging, small and mid size business and specializes in solving many of the above questions. Contact OSYB at (516) 393-5620 or email firstname.lastname@example.org