Without properly managing a company’s finances and keeping careful records of payroll, invoices and checkbooks, small business owners can find themselves short of capital and in desperate need of a small business loan. The sheer volume of receipts, invoices and numerical calculations involved in an enterprise’s bookkeeping can be overwhelming and mistakes unavoidable, so it’s important to keep track of this section of a small business to minimize accounting errors.
As a small business owner, you might have more of the entrepreneurial flair, so you have decided to hire someone to handle the bookkeeping and other accounting needs of your fledgling company. However, some business owners might not have the revenue to support an additional person on the staff, so the owner must wear all of the major hats in the company. In other scenarios, you might find yourself short-handed after the unexpected departure of the bookkeeper or accountant, and this can leave you struggling to figure out what’s going on with the receipts and invoices. This means even if you plan on delegating the accounting duties to someone else, it’s still vitally important that you understand some of the basic bookkeeping responsibilities and functions, since keeping good records alerts you to any cash flow issues as well as any potential legal issues.
Stick to the basics
If financial accounting isn’t necessarily your strong suit, it doesn’t make sense to try fancy budgeting techniques or complicated bookkeeping methods. All you really need to focus on is the cash inflows and outflows, or how much money is coming in and how much is going out of the company. Although that seems simple, it can still be a lot to handle, which means you need to ensure you’re carefully tracking and recording each transaction.
While there is a plethora of programs and platforms you can install and implement to track all of this information, Entrepreneur noted that some of these, like Quickbooks, can make the small business bookkeeping process appear unmanageable, especially if you’re not operating a high volume operation with a significant amount of invoices and expenses to track.
Track accounts receivable and payable
You should always track what customers owe the company with receivables as well as what outstanding debts your business owes vendors and other organizations, such as banks or the government. If you don’t keep track of these, including the dates, amounts, terms and other contact information, you can find your company not collecting the money it’s owed, or you can learn all too late a vendor has been charging you interest on a payment you forgot to make.
Maintain adequate inventory
If you run a goods-based company, tracking and keeping records of your inventory counts is also crucial for ensuring you have enough product in stock and that you’re also not overspending on these items. In addition, with proper record-keeping for your inventory, you can forecast tracking trends and keep these stocks to a minimum, thereby freeing up more capital for the company. Perhaps most importantly, keeping a careful account of inventory also prevents employee theft or misplaced merchandised.
Balance your business checkbook
You might have a tendency to keep an estimated running tab of expenses and revenue in your head, or you might save checkbook balancing for once every quarter or a few times a year. However, this duty must be performed on a regular basis, ideally once a month, if not more often. This leaves you with a clear snapshot of how much working capital you currently have in your control. Further, as noted by Intuit by Quickbooks, this makes it easier to discover and correct any financial errors or inadvertent omissions, whether by you, the bank or another employee.
Employees can eat up a good portion of your monthly budget. In addition, there are many legal and tax requirements you must comply with, so you must make sure to review this process to check its accuracy and compliance. With federal, state and local laws to deal with, you must be sure to withhold the appropriate Social Security, Medicare, disability and payroll taxes. For something like this though, there are several payroll service providers that might make the task much easier and less of a hassle.