Bookkeeping For Small Business

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.

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