As each tax season approaches, many business-owners find themselves overwhelmed with back-logged financial decisions and bookkeeping tasks. For most, managing financial records is a dreaded chore. They work hard to develop business plans and a client base, but avoid balancing the books for long periods of time, or do it in fragments that never seem to come together as a coherent whole. Over the years, I’ve come to work with a great many brilliant and resourceful entrepreneurs who are loath to deal with this aspect of their business. But what me must all remember is: businesses rarely go under for lack of a good idea.
Ironically, bookkeeping is one of the least costly and most controllable components of a business, provided there is a solid foundation. It is true that unless you have experience in bookkeeping, many of the fundamentals of business accounting will elude you.
Here are a few practical tips to jump-start you on transforming this aspect of your business into an efficient and coherent system:
Use a computer for bookkeeping.
This may sound obvious, but many still try to manage their finances manually, even those with a computer and accounting software. There are a number of great software packages on the market. The problem is that you cannot simply order the software and begin using it. In order for these programs to be used to their maximum potential, you must learn them well. Tackling this on your own can be time-consuming and confounding, often resulting in either not understanding all of the shortcuts and benefits of the program, or attempting to learn all the unnecessary minutiae of the software. The key is getting a few—or even one—private lesson tailored to your needs and level of expertise. You also MUST set up the chart of account correctly or you reports will be off.
Reconcile your accounts monthly, and faithfully.
This is the best way to stay on top of your books. Reconciliation must include all bank and credit card accounts, not just your checking account. If your system is set up properly, reconciling can happen very quickly. This is frequently a step which business-owners neglect. If you have onsite bookkeeping staff, be sure to get them trained properly by an expert on both the software as well as accounting fundementals, and even have an outside professional check their work once a month or once a quarter. Establish a relationship with a good bookkeeper. You can do this in a number of ways to suit your business needs, your skill level and your budget.
Manage your receipts.
Cash receipts are the only paper-trail you have for your cash expenses. Here’s a fast and easy method: mark two large envelopes “Cash receipts” and “Non-cash receipts”. Put these envelopes on your desk; the important thing is that they’re accessible. Everyday, empty your pockets/wallet and put the receipts in their respective envelopes. Once a month, empty the contents of the “Cash receipts” envelope and enter each receipt into your accounting program. You’d be amazed at how quickly you can do this, especially if you use the shortcuts of the software. The non-cash receipts can be clipped together and filed away; you’ll be entering these expenses from your checkbook & credit card statements. Doing this regularly enables you to run accurate financial reports.
Run and study financial reports monthly.
By these I mean your “Balance Sheet”, and your “Profit & Loss” statements. These two are the cornerstones of the financial health of your business. I generally customize report templates for each client with an easy-to-find button on the screen. This way they no longer need to scan through the dozens of the reports listed in the program. Remember, make things easy for yourself. There are many great shortcut modules in every software package. Have fun with them!
Hire a professional to prepare your taxes.
This is not a waste of money; it is simply smart business. The IRS is constantly updating its guidelines and changing its focuses. You need to be aware of new developments. Invest in a good tax preparer or CPA; two heads are better than one. There are many affordable tax professionals. Note: This is not the job of your bookkeeper, whose role is to provide accurate and complete information to your CPA. Since CPAs billing rates are considerably higher than bookkeepers, be sure to use yours wisely and save your mechanical and basic bookkeeping questions for your bookkeeper or software consultant. Your CPA will thank you, and you will save your dollars.
Your relationship with money will influence your ability to make and manage it.
Most people with money-management difficulty have a precarious relationship with money, ranging from polite distance to total avoidance. This is generally due to a lack of guidance with money matters in their past. Become intimate with this powerful resource. Your money must be nurtured like a beloved garden; it is only then that you can watch it grow and serve you and your business. This is healthy and absolutely necessary for continued prosperity.
Austin Bookkeeping & Consulting
Cheryl Finfrock, Owner
Call Now for Needs Assessment
(512) 426-9217 or email cheryl@austinbookkeeping