Having strong accounting and financial records are extremely important for the success of any business. Businesses can sink or float depending on how well they handle their finances. Small to medium size businesses (SMB) especially are very susceptible to sinking if they have poor accounting practices.
Even though SMB's rely so heavily on cashflow, it’s not uncommon for SMB owners to have an inadequate understanding of the finances themselves. They often believe that accounting is better suited for larger companies with more assets, so they run their business as they would their own personal finances.
However, having good accounting practices is imperative for keeping your business operating smoothly, and with less risk that could potentially cost you the business.
Here are a few things to ensure you’re on top of everything.
Your weekly DO’s
Maintain a cash flow spread sheet and update it at least weekly, using the bookkeeping / accounting software you’ve chosen. There are many software choices on the market with free or low-cost packages to assist an SMB.
Outsource your payroll and payroll reporting to a payroll service provider who have the skills to keep up with the myriad state and federal reporting that is inherent with payroll.
Keep two sets of records and compare them to check that all figures are correct, consistent and complete (this is called a ‘reconciliation’). SMB's often only reconcile their accounts once a month when they receive their bank statements. While this may seem logical, that means that there is a 30-plus day gap between checks. So much can happen in that time! If you can, you should reconcile all of your cash accounts weekly to keep on top of it and to act on any issues immediately.
Have a solid system for paying your vendors. This will help you keep on top of your debts, as well as establish a good reputation and credit history for your business. Each vendor’s payment requirements will differ, so you need to make sure that you’re on top of this and note when payments are due. Some vendors may bill monthly while other may require payment on receipt. If you only make your payments once a month, you could end up paying things late. Weekly payment of bills can help avoid any late payments and any other issues that can arise if you don’t regularly keep on top of things.
Make sure that your customer receipts are recorded as soon as possible. Preferably daily, but weekly would also be enough. You really don’t want your customers receiving late notices for bills they have actually already paid. That’s a guaranteed way to make them unhappy!
Other transactions include automatic debits, bank fees and interest payment, common transactions that will need to be recorded weekly. Doing a task like this prevents everything building up over a month and becoming overwhelming when issues are too far gone to resolve.
Related: How to get the most out of your Accountant?
Don’t let your basic accounting tasks pile up. Not dealing weekly, or even daily, with accounting issues is like piling up the stock in the warehouse and then trying to find the one item you need a month later. ‘Water wears away a stone’ and habitually tackling accounting tasks daily and weekly will make the business financials flow more smoothly, and give you more energy to work on the business instead of in it.
Your weekly DONT's
Don’t try to do it on the cheap with a low-cost service provider. Go for quality over quantity every time.
Don’t manually manage significant amounts of work – it can lead to human error. You don’t get awarded hero status for trying to manage everything yourself. There are a wealth of automated systems for business on the internet, most of them at minimal cost. Trust your staff and delegate wherever and whenever you can. Call on outside specialist knowledge at appropriate stages.
Don’t pay invoices without matching it to a purchase order. This should be done daily, but certainly not less often than once a week. The more often you check, the less you will be skewing the books with accumulating debts.
Don’t forget to seek advice from your Accountant and lawyer on important financial matters. Small business owners are not expected to be experts in the financial, accounting or legal side of the business, which is why there are professionals like accountants, bankers and lawyers you can call on. Money spent wisely on a good professional accounting firm or law firm will be one of the best investments a business can make.
Staying on top of your accounting is extremely important. So many common and painful issues can be avoided by doing tasks weekly rather than monthly or even more sporadically.
Related: Why bad Financial Record Keeping means bad business?
Have you noticed our #FridayExpertTips... here's one that relates to #Accounting
"Always keep your RECORDS UP-TO-DATE. Businesses with up-to-date accounting records are far better at making informed, educated decisions based on real, current facts."
Azure Group have a specialist Business Accounting team, who manage the outsourced accounting function for a myriad of businesses. Our team consists of highly talented and experienced accountants led by senior finance executives who each have substantial commercial background and have worked with various sizes businesses across a wide range of industries. Get in touch if you need help.
Related: How to transition from in-house Accounting to outsourced Accounting?