If you were to list all of your reasons for starting an entrepreneurial venture, it is probable that “I love bookkeeping!” will not be on that list.
Unfortunately for the math-challenged business owner, a reliable accounting service is key to a smooth launch and the long-term health of the business. Accurate, up-to-date books allow a manager to keep track of the company’s performance and pinpoint areas that need further development.
With this in mind, below are five recommendations for maintaining accurate books:
1. Make and keep a consistent schedule.
Some accounting duties, such as making deposits and adding transactions to your ledger, should be accomplished daily. Monthly tasks include balancing your credit card and bank accounts and generating and reviewing essential financial reports. There are quarterly and annual tasks that are also part of effective bookkeeping practices. This may seem overwhelming, but creating a reminder system can help keep you on task.
2. Make the most of cloud technology.
There was a time when only large corporations had access to high-tech administrative resources, but cloud technology has introduced a myriad of tech tools that aid smaller enterprises by simplifying complex accounting and administrative tasks. It also facilitates use of a remote accounting service, so you can keep track of your finances at your San Diego office or while doing business in New York.
The staff at OnTrack Accounting recommends the following cloud resources to clients: Bill.com, QuickBooks Online (for your ledgers), Tallie (to report and track expenses), TSheets (for tracking time sheets), and Fathom (for your management and financial analysis reports). The tools available at these sites can alleviate some of the stress innate to bookkeeping.
3. Understand your reports.
Income statements, balance sheets, and cash-flow statements are three vital reports that you will use to stay on top of your business finances and to pinpoint possible areas of improvement. The following is a short primer to familiarize you with these financial reports.
Are you making or losing money? Your income statement will tell you. What does your business own and how much does it owe? The balance sheet lists your company’s assets, capital, and liabilities. Where did your cash go and how much do you have left? This will be apparent on your cash-flow statement.
You or your accounting service should generate these three financial statements at least monthly.
4. Predict possible outcomes.
Business forecasting will allow you to predict short and long-term performance. The forecast offers a prognosis for capital and cash flow needs as well as a profitability outlook. It will use the company’s expenses and revenues to generate a set of good and bad scenarios that allow for realistic goal-setting and effective management decisions. If you are planning to include outside investors, the business forecast will be a helpful tool during negotiations.
5. Hire a professional bookkeeping service.
I may be guilty of bias here since my company provides bookkeeping and accounting service out of Orange County. However, it can be unrealistic for business owners to assume that they have the knowledge and time to keep their books accurately. Even if you cannot hire a full-time accountant, outsourcing to a bookkeeping service is an excellent alternative.
A professional bookkeeper will ensure that you are compliant with best practices year-round and he or she will maintain audit-ready financial records. Furthermore, you will have an expert on hand to help you understand your reports and offer direction for effective financial planning and realistic business forecasting.
The success or failure of your business might depend on timely accurate books, so bookkeeping should be a priority whether you do it yourself or outsource it to professionals.
Talk to a professional accountant or bookkeeper at OnTrack Accounting in Orange County. We are always ready to answer your questions!