It's easy for small-business owners to get so busy that they slack off in one of the most important areas of their businesses -- accounting. It always seems more important to close a sale or service a customer than it is to balance the books. But if you don't take time to tend to bookkeeping basics, your fast-growing business could run off the tracks.
The following tips can help you focus on the crucial aspects of your company's finances.
Protect your company from check fraud
Set up financial limits for checks with your bank. Ask that your bank never cash checks made out to an individual, except for payroll checks, which should be written from a special account and only to designated individuals. Keep inventory of blanks checks -- and keep all checks secure in a safe or lockbox.
Keep careful records of all bills paid
Your financial records serve not only as the basis for cost controls, but also as your tax records.
Review all financial statements regularly
In other words, balance your books! If more than a week goes by without writing down expenditures and income, you'll be playing catch up. Too often, this results in errors or overlooked payments. Also, reconcile your bank statements as quickly as possible after receipt.
Hire a bookkeeper or accountant if you're too busy to keep your books
Many part-time or contract bookkeepers work at an hourly rate. Services included would be: paying salaries, coordinating and handling accounts receivable and payable, balancing ledgers and checkbooks, and organizing financial information required for business plans, loan proposals, cash-flow statements, etc.
Continually review all costs and expenses
Don't let your financial statements sit idly in the drawer. Use them to see how you can cut costs, find better suppliers, reduce unnecessary purchases, etc.
Set cost-control systems
You or someone in an executive position should approve all purchases over a certain dollar amount. Encourage employees to include a description of need and importance with all spending requests.
Monitor your collection procedures and outstanding invoices
Payment terms should be written on every invoice you send out -- and should be agreed upon with clients before a job is started. Ask that payment be made within 15 or 30 days of invoicing. When working on long projects, charge at regular intervals. Don't wait until your bill is so high that if payment is not made you'll be financially hurt. Cash flow depends not only on how much you make per hour, but also on receiving payment in a timely way.
Keep up to date on all tax and accounting rules
Tax rules change yearly. It's better to keep abreast of these changes yourself so you don't have to depend completely on your accountant.
Pay yourself first to fund your retirement
As the saying goes, no one else will watch out for your retirement funding. Take a specified amount from each incoming check (recommended is at least 10 percent) and put it into your retirement account.
Keep it simple
Set up you accounting system to be as simple and easy as possible. Don't have ten checking accounts if two will do. Write a schedule so you do the same thing every time a check comes in. Create monthly to-do accounting lists. A streamlined, systematic accounting procedure will help you avoid mistakes and minimize missed payments.