- Don’t Mix Personal with Business. It’s critical that personal and business finances be kept separate at all times, regardless of a company’s size – even a small start-up must first begin with its own accounts. You must then devise an earnings management strategy dictating how cash is removed from the business to meet personal expenses and savings goals – in essence, how to manage cash flow.
- Reconcile Without Fail. Reconciling your business’s books with your business bank statement every month is one of your most fundamental accounting duties – never, ever miss it, and follow up immediately on any errors you discover.
- Know the Difference Between Profits and Cash Flow. To have an accurate picture of your company’s true financial condition at all times, work with an accountant to produce regular financial statements. These consist of a balance sheet, income statement, and profit and loss statement, which should be produced at least quarterly.
- Keep/Label/File Everything. All receipts, bills, invoices, and timesheets – all of it, no matter how small or insignificant you might feel it is. Organizing your filing system is worth taking an entire day off to do if necessary (that is if you are not outsourcing to begin with) – just know that it will save you COUNTLESS hours down the road.
- If You Delegate – Do it Wisely. It is best not to have just one employee handle every aspect of the bookkeeping/recordkeeping system. Or if they do, have them systemize their processes so that it can be easily learned by a new hire, or audited by a professional. Remember that losses from internal fraud could significantly cripple a small business, or even lead to bankruptcy.
- Focus Carefully on Employee/Payroll Records. These records are painstaking, gray-hair springing, head-banging chores that are amazingly easy to go cross-eyed over. Mistakes aren’t taken kindly by the IRS, and they LOVE to charge interest on underpayments. And if you overpay – do you think they will tell you? Also make sure your employees are classified correctly in the first place, and that you are withdrawing the right amount of taxes for each individual.
Whether you pride yourself on staying organized or you are a self-proclaimed slob, there are few business owners in this world that actually look forward to doing filing, book-keeping, and managing their records. We all know that that we should stay organized, the question is how to do it and not spend any more time and energy than absolutely necessary. Not everyone is in the position to hire a professional – but it should be a consideration when looking at the value of your time as a business owner. Regardless, here are a few simple steps that you follow to improve your effectiveness: