Too many business owners focus on growing their business to the detriment of other elements. Proper bookkeeping is one of those elements. It’s understandable, of course. You’re not an accountant. You’re a business owner. Growing your business is what you do best. However, it’s critical that you have the right procedures, processes and systems in place. Your bookkeeping is just as essential to creating a thriving business as the right product or service, and the right brand positioning on the market.
Doing Things Differently
If you’ve grown your business from the ground up, chances are good that you started off operating on a cash-basis. That is, your customer paid you, you gave them a receipt, and the transaction was noted and recorded. It’s perhaps the simplest format in existence, but it’s too simple for growing companies. Eventually, you have to change things – you’ll find that you have to use the accrual accounting method. Learning a new way of doing things isn’t easy, but it is vital for your company. In the accrual method, transactions are recorded and recognized as they occur, even if there’s no cash changing hands.
According to the bookkeepers, your books should include a number of critical elements. These are as follows:
- Cash Expenditures: You can track this in any number of ways, including keeping petty cash on hand, or writing reimbursable checks.
- Inventory: Your inventory is a significant part of your business’ books, and records should include stock numbers, purchase prices, sale prices and more.
- Accounts Payable and Receivable: As a business, you’ll have customers that owe you money, and you’ll owe debts to other companies. Record as much information as possible concerning each entry, including amounts, dates paid/due, terms, client information and account balances.
- Employees: You have a significant legal burden when it comes to your employees. You have to deal with withholding, worker’s compensation insurance, unemployment insurance, employer matching programs and more.
- Revenues and Expenses: Your revenue and expense reports should give you the answers to questions such as how much money is coming in during the month, or how much money you have going out the door. There are several options for recording this information, including both journals and ledgers.
Charting Your Course Forward
Another reason that proper bookkeeping is so vital for small business owners is that without access to this informatoin (accurate, correct, updated information), you have no way of determining whether you’re actually profitable, and charting your path forward. Without knowing where you are, you can’t determine if you’re even seeing success, much less plan for the future.
There are plenty of options when it comes to bookkeeping. You might decide to hire a part-time bookkeeper to work in-house. You might decide to work with a CPA or accountant outside your business. You may decide to do things yourself to save time and money (not recommended, particularly if you’re not familiar with bookkeeping and accounting best practices). While all of these are possible routes forward, they’re not necessarily right for your needs.
Hiring a part-time bookkeeper means that you’ll still need to manage and supervise them. Working with a CPA or accountant means that you still have to be responsible for collecting, sorting and storing your financial information before you deliver it to them. Going it alone is perhaps the worst option, leaving you open to a wide range of threats.
The best solution is to outsource your needs to a respected service provider that offers industry-leading experience and insight fused with cutting edge technology that ensures your information is accurate and always available to you.
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