Take the following steps to ensure that your business’ bookkeeping doesn’t become an overwhelming burden.
Sometimes technology can confuse even the technology-savvy business owner. Consider that many small businesses use a generic chart of accounts for their bookkeeping. But if you’ve just bought an accounting software package which is going to be generic, bookkeeping becomes unnecessarily burdensome as you try to fit transactions into an incompatible account structure. At that point even the most adept technology-savvy business owner-manager can throw their hands up in despair.
Simplifying the bookkeeping
A fast-moving business will, typically, be increasing the number of credit accounts, credit cards and subscription or vendor accounts that it uses. Too many accounts can complicate bookkeeping. One way to avoid over-complicating is to streamline your credit and transaction accounts and set a regular pattern for handling the accounts month to month. This could be once a month or weekly (better for cash flow management). And, as any accountant or bookkeeper will tell you: “Don’t mix your personal expenses with business expenses on a business credit card.”
Keep books up to day
While monthly accounting is okay in theory, weekly bookkeeping has its merits. Even a modest-sized business could have several dozen transactions to account for each week when you take into account vendors, sub contractors, hosting accounts, credit card charges, PayPal and other service platform like Elance, O-Desk, Freelancer and the like.
Accounting is “the language of business”
It is easy to seek bookkeeping as a necessary ‘evil’ and all about compliance- gst and tax obligations – but it is a fact that business difficulties such as cash flow crises, lack of profitability can arise from a poor understanding of costs structures and margins. Doing the books improves cash flow because you collect quicker on invoices and recognise the cash flow cycles. Cash flow projections are essential for you to plan for managing the business cycle of your business and can only arise from regular (and accurate) bookkeeping.
You don’t have to do the books yourself if you don’t meet the essential trade off: time is scarce so is your time worth more working ON the business than paying a bookkeeper to do your books each and every week in a professional and error-free way.
Don’t discount: identify expenses
Some costs can be better managed. The best way to identify these costs is to see them in relation to your overall monthly expenses. Regular bookkeeping and a monthly report from your bookkeeper contractor or service allows you to see expenses that may need addressing.
Your finance toolkit
You may know your ‘stuff’ but having intimate knowledge of revenue and costs – both fixed and variable – are a requirement of good business management. What information do you need to be a good manager? You may have two or three key indicators (like revenue or new customers or overdue invoices) but other information may be equally vital to be a successful business owner/manager – especially if you need to make a finance proposal for working capital or capex. Information includes:
- Income tax returns (last three years)
- BAS returns (last three years)
- Financial statements (last three years)
- Business description
- Cash flow projections
These provide peace of mind. Having up-to-date financial records will not only give you the peace of mind needed but will put you in a better position to:
- Determine if your business is in a position to expand
- Determine which products or services you are offering need additional marketing strategies
- Know exactly how your business is doing.
For sure there has been a massive expansion of cloud-based accounting software ‘solutions’ many with literally, hundreds of add-on options; these present a challenge even for the accounting and bookkeeping professionals. The bottom line (pun intended) is that accountants, bookkeepers and business decision-makers don’t need more tools – they need the right tools to be able to deliver the right information when and where they need it.
About the Author:
Written by Morris Kaplan, Director Content & Marketing at www.bookkeepershub.com.au