Procedures
There are several reasons why it is important to develop and fine-tune the procedures that you have around your accounting practices in your business
The most important reason is that the financial health of your business depends on your ability to manage the flow of money. Your accounting procedures don’t have to be complicated but they do need to be well organized.
Another reason why it is important for you to have solid procedures in this area is that as you grow and begin to hire help, it will save you time and money to have your procedures in place. If you were to hire an office assistant right now to help you deal with your accounting work, how much time do you think you would have to pay them to figure out a system to begin with?
When you have procedures in place and you hire someone to work with you all you need to do is train them on the procedure that you already have in place and they can get to work right away.
Paperwork Management
When it comes to accounting there is a lot of paper that needs to be dealt with. Knowing what you plan to do with the paper ahead of time will save you a lot of headaches moving forward.
I have a filing system set up for the accounting paperwork that took me years to perfect, and I am going to share it with you now.
I have two files for each item on this list. One is for the paper that hasn’t been entered into the accounting software yet and the other is for after it has been entered. This works really well for me because I have an accountant who comes in quarterly and does some of the entry and the system allows me to do the filing between the times that she is not here.
Here are the files that I use:
- Tax Misc
- Utilities
- Contracts
- Visa
- PayPal
- MasterCard
- Bank
- To Be Billed
- Donations
- Receivables
- Payables
- Expenses
Data Entry
What system are you using and is it working for you? When you first started your business you might have used a physical ledger to record the money flowing in and out of your business, or perhaps you used excel or another program such as that.
Looking at the system that you are using becomes important as you grow. What works, in the beginning, may or may not continue to work as your business grows. I suggest that you discuss your options with your accountant (the one who does your taxes every year) as they will be able to give you the best advice.
Knowing what needs to be entered into your accounting system and who does it is very important especially if you have someone else working with you on this portion of your business.
Having a system in place for entering your transactions into your accounting system will keep things organized and it will save you time as well.
If you haven’t put a system in place for this yet, perhaps you have the “shoebox” system where you put all the financially important paperwork in one pile and hand it over to your accountant at the end of the year.
Using a system like the “shoebox” system ends up costing you a lot more money and time. This was how I started out, and I lost papers that took me extra time to find and some I couldn’t find in time for claiming on my taxes. I was frustrated and I lost time and money, but it also cost me more money for my accountant to file my taxes too. My accountant had to bill me for the time it took for her to go through and organize all the paper before she could file them.
Regular Reconciling
Part of the system is to make sure that you are looking at your financial data on a regular basis. This is another way to save you headaches and money.
If you wait until the end of the year, it is possible that you missed a payment from a client or you missed a payment to one of the people that you pay for services. On the other hand, you may have overpaid someone because you thought you hadn’t paid them yet when you actually had.
These kinds of mistakes can be sorted out easily if you are checking in on your accounts on a regular basis. Checking in regularly can also show you where you can save money on your bank fees.
Communicating with Clients
It is important to have a system in place for your communicating with your clients. From contract signing, billing or overdue accounts knowing how you want to handle those situations and knowing who is responsible for each task is important.
Without a procedure in place, and having multiple people involved in your business you could have situations where either no one is following up with these things or too many people are following up. Either way, it is confusing to your clients.
Creating great communication policies will make your customer’s experience with your business that much better.
The Small Business Accounting Checklist
I put together a checklist that will help you get started building your accounting policies and procedures. You can get your complimentary copy by filling out this form:
