Bookkeeping and Accounting will often be tasks that a small business owner will struggle with.
Let’s face it. Your goal in the long run is to make money. That is why you are doing this in the first place. Often entrepreneurs start their own venture so that they can own a business and generate a comfortable living doing what they are passionate about. That passion will come from a variety of outlets, such as products, manufacturing, services, and many other types of revenue generating activities. Whether you hire employees or a one man show right now, your attention should be on the activities that will create that flow of money coming into your business. It is the lifeline that will support your business and yourself. Getting your product and services out to the general public and delivering your goods to the end user is your most important task. And it should remain that way.
But you cannot neglect the necessity of having your financial records taken care of. Quite often, this can become a task that is not viewed as being as important as generating the actual sale. And you may be right on that point. But it is something that needs to be taken care of for the overall benefit of your company.
If you operate a business that, as an example, requires payment up front for a product, then you may not be concerned at all about collecting on orders placed. Funds are in the account immediately! But if you are a company that allows customers to place orders or purchases on an account, you are going to need to get those invoices out as soon as possible, following the order being fulfilled. Are you creating invoicing as soon as possible and getting it mailed out or emailed to the customer for payment? The quicker you can convert these invoices into cash in the bank, the better cash flow you will have to operate. You may need to follow up with some customers who may be a bit slow in processing. All of these receivables need to be managed so that you are making sure you get paid for what you have provided.
You will also need to make sure that all of the business activity expenses are recorded and tracked. Be careful with those receipts! Getting your expenses recorded in your books as soon as possible is much easier to manage, rather than trying to find where you put them and enter them every month or so. If you are purchasing any materials, goods, or even services for your business that you place on account with another business, you need to know when the payment is due. Remember your receivables, mentioned above? Well, your account is a receivable for another business. You need to do your part in ensuring payments are issued when they are due. Getting this kind of expense recorded as soon as possible will help a great deal with this. And avoid late payment penalties.
Where do you record all of this? In a notebook? On a pad of paper? No, there are many different bookkeeping and accounting software solutions on the market that can tackle this very easily. The packaged software will come with all the necessary components to set up your ledger accounts (a fancy name for the type of expense or revenue) and will equip you with report generating tools that will give you a snap shot of the health of your business.
These financial reports may just look like a report of a bunch of numbers to you. They are so much more than that. They provide clarity on the overall activity of the business. They will pinpoint issues that may become very problematic in the future. And they are key reports that investors and banks will be looking at, if you are needing funding at some point in the year. Or, if the end result you are seeking is to sell your business, this is “looking under the hood” for potential buyers.
Unless the business you are operating is actually an accounting or bookkeeping service, chances are that you will have very limited knowledge about how to set up your books. How accurately you are able to set up those ledger accounts, will determine how accurate your reporting is. As bookkeeping or accounting isn’t your primary focus in your day-to-day operations, you shouldn’t be using your time to learn everything about it. Instead, trust a professional who is as passionate about your books as you are about what you do. They will share with you their insights on the health of the business, help you to understand all those reports with the numbers on them, and help you see your path forward into the future. Having them on your side is well worth it.