For many business owners, record keeping is an unwelcome chore that often gets far less attention than it deserves. There’s no shortage of other things to do that are far more fun. But keeping good records is essential to running a successful business – and staying out of trouble. Here are 10 ways to get your business finances and recordkeeping under control – and keep it that way:
1. Separate your business and personal finances. Many biz owners (especially sole proprietors), and startup entrepreneurs fail to set up separate banking, bookkeeping and other systems to keep track of their business finances, causing confusion, tax headaches and a potential loss of business value later on. Using business checks or credit cards to pay for personal expenses, for example, can get you in legal hot water, and at a minimum complicates your recordkeeping.
2. Reconcile and don’t delay; do it today. Review your bank statements and balance your accounts regularly. Don’t just toss statements into a stack. If you let days or weeks pass without updating records, you’ll soon be lost and errors may go unnoticed. If your business finances change daily, you should have bookkeeping systems that update daily as well. This should include daily sales, purchases and other transactions, and especially any cash transactions.
3. Hire a bookkeeper. Don’t pay an accountant’s higher professional fees to handle routine bookkeeping. Many biz owners have part-time bookkeepers to help keep things in order. The American Institute of Professional Bookkeepers (AIBP) has some excellent bookkeeping tips, and a free bookkeepers hiring test. Or consider outsourcing it online with a service such as Balance Your Books.
4. Use calendar month timing. Most business owners find it helpful to account for money on a calendar month basis. But things don’t always line up. For example, if your bank statement isn’t based on a calendar month, ask for it to be changed. Most banks can make that accommodation.
5. Be pro-active with your accountant. One reason to keep good business records is so you can provide accurate and timely information to an accountant to prepare your business taxes. Ask for their advice on how to set up your books and organize your information.
6. Use a payroll service if you have employees. When your business becomes large enough to have employees, recordkeeping requirements take a quantum leap. Outsourcing to a payroll service such as Paychex, Sure Payroll or ADP places the record keeping burden on them, and makes your end vastly easier.
7. Use an online expense reporting service: If your business reimburses employees for out-of-pocket expenses (yourself included), you need a process to track and record those costs and make timely, accurate payments. Several web-based services are out to ease the pain with easy-to-use, low-cost systems that make the expense reporting process as quick and easy as possible for small business owners. Choices include Expensify, Concur Breeze and ExpensePoint.
8. Keep it simple and consistent. Bookkeeping is all about columns, and by keeping the same column headings all the time, you will avoid the frustration of mismatches. And if you avoid over-categorizing income and expenses, you’ll also save yourself time. Often it’s just not necessary to break things down into great detail.
9. Automate your invoicing. Online billing services that can effortlessly issue your invoices and keep track of everything are one of the most helpful web-based (or “cloud”) small business services arou8nd. Look at Bill.com and FreshBooks.com in particular. The services are cheap and can help clean up a billing mess quickly.
10. Get the right software. Don’t even think about keeping your books manually or with spreadsheets. Low-cost, easy-to-use financial software for small business such as QuickBooks, or the free version called QuickBooks Simple Start (both at www.intuit.com) are perfect for keeping everything in order.
Copyright © 2000-2011 BizBest Media Corp. All Rights Reserved.
About the Author: Daniel Kehrer, Founder and Chief Content Officer of BizBest Media, is a senior-level leader in digital media, content development and online marketing with special expertise in startups, SMB, social media and generating traffic, engagement and leads. He holds an MBA from UCLA/Anderson and is a passionate entrepreneur (started 4 businesses), syndicated columnist, blogger, thought leader and author of 7 business and financial books.