Bookkeeping For Small Business
Author: Mark Walters
There are so many new software programs for small businesses
that many new business owners are starting to think that small
business and ecommerce businesses do not really need to be
concerned with record keeping. This is a myth. Just because your
spouse and best friend don't consider your business real, the
auditors and revenue agency will hold you to the same rules and
regulations that apply to multi-million dollar corporations.
There are a few methods of keeping books that will serve both
the government's regulations as well as the business's profit
building measures.
How Does Bookkeeping Help Improve Profits
Bookkeeping can help businesses track the percentage of a
dollar that generates more income, how much is needed to
maintain the business, and what is waste. Without a good
bookkeeping system, investors, ecommerce businesses, and small
businesses cannot track these numbers and improve their profits.
A company should devote at least 40% of their cash and time to
income generating. Too many small businesses are unaware of the
amount of money and time they spend generating income, or the
amount is wasted.
Most small businesses ignore their project tracking software.
This can track the time and money invested in a project, the
income generated, profits earned, and calculate the percentage
of money used to generate the income, and the other expenses
used to sustain the project.
As businesses learn to use project management systems
effectively, they can learn to streamline their projects, reduce
waste, and income the profit margins.
Avoiding Common Mistakes
- Keep Good Records
There are mistakes that a business makes that can land them in
trouble. First, save everything. If a check is messed up, save
the ruined copy, and make sure that you have a record of the
wasted check. This should also be done for invoices, and any
financial tracking paperwork that is numbered.
A good software program includes numbers, or spaces to include
numbers that will let the business owner track everything. The
most important thing is to `be consistent.' Changing bookkeeping
methods ruins the charts and reports generated by the software.
- Business Bank Account
A business bank account includes all the cash generating
documents including checks, invoices, and deposit slips. Do not
`save money' by getting versions with no duplicates. In fact, it
might be a good idea to get the types that have two duplicates.
It is better to have a separate duplicate that can be used in
the audit trail, than to not have a good method of tracking the
cash flow.
Do not get a pass book. Instead, ask for monthly statements to
be mailed to you. These can be photocopied and used to double
check which checks have been cashed, and which customer checks
have cleared the bank.
Do remember that it is illegal in most states to void a payroll
check.
-Banker Boxes
Banker boxes are now available at every office supply store.
They are cheap, and can be outfitted with file racks to
facilitate organization. These boxes keep everything in one
place, organized, and convenient.
- Invoices
One of the biggest problems for most small businesses is the
production of invoices. Businesses that use computer generated
invoices should always produce a copy for the audit trail.
-Checks
When receiving checks, scan and print a copy. This improves the
audit trail, and can solve any problems that arise in the
bookkeeping methods, or suppliers who claim they were not paid.
-Cash Receivables
Many times a new business is asked to take money on payment. In
many cases the business issues an invoice expecting to be paid.
When they are not paid, they are left to absorb the bad debt.
Instead, have a contract for any `cash receivables' that are not
paid immediately. If a contract is not appropriate, take a post
dated check.
These are the only two things that can be submitted to a
collection agency with any hope of ever receiving any
compensation.
As a last piece of advice, I would suggest that small
businesses avoid petty cash boxes and ATM cards. It is too easy
to `haemorrhage cash' when it is readily available. All expenses
should be thought out before the purchase is made. It is too
easy to lose track of the business's budget if it is easy to
access the money.
About The Author: Mark Walters is a third generation
entrepreneur and author. He offers free training and investing
videos designed to speed you towards financial independence at
http://www.cashflowinstitute
