Many small business owners are not fully qualified to tackle the bookkeeping and accounting functions for their businesses, but often take on the responsibility in an effort to save the company money by hiring one less staff member.
Even though no business owner should be overly stingy with resources when considering a company’s finances, most attempt to save by handling some (if not all) of the responsibilities on their own.
Business owners who choose to wrestle with the numbers on their own should at least adopt a few good financial habits.
1. Schedule Bookkeeping
If you plan to keep your company’s books, pencil the bookkeeping into your calendar at a regular weekly or monthly time. Not only will this help you get into the habit of recording receipts and transactions before they pile up, it will also keep you up to date on the company’s most current financial status.
2. Reconcile Statements Monthly
While ignoring the monthly bank and credit card statements which arrive in the mail can be tempting, doing so is not a smart practice. Checking statements against your company’s own records will ensure any mistakes are found, and more importantly that every single transaction and dollar is valid and accounted for.
3. Separate Business and Personal Accounts
Although this might seem obvious, many sole proprietors run business transactions through personal accounts. Even though a sole proprietorship might be operating under an individual’s social security number, this can make tracking a company’s revenue, expenses, performance, and success extremely convoluted and difficult.
4. File, File, and File
When it comes to bookkeeping, one can never be overly organized. Maintain records of every single company transaction. Keep all receipts and other records of payments and expenditures. Acceptable records will include the transaction’s date, dollar amount, and purchase information. A bookkeeper should set up a reasonable system of maintaining these records. If the business operates with only a few transactions monthly, a simple filing system will suffice. If the business, however, handles numerous transactions daily, a more sophisticated or electronic filing system might work best.
5. Utilize the Right Accounting Software
Sure, before the age of the computer, accounting was done by hand. Before the calculator, we used slide rules, but today no office has a slide rule in use and no office should be without accounting software. Not only does accounting software eliminate mathematical errors, it also automates the processes of saving receipts, tracking accounts, invoicing, and creating important financial statements. Accounting software products all differ from each other in terms of features and intended use. Spend some time researching your options to ensure you select the right software for your business.