Number 10 on our list is to set up a recordkeeping/accounting/in-house office system for your services. Many new business owners tend to put this on the back burner or contract it out to “someone who likes math,” and it can soon become cancerous. Improper record keeping or accounting can become a business owner’s worst nightmare, so attention to detail is extremely important.
Financial Management is the process of managing the financial resources, including accounting and financial reporting, budgeting, collecting accounts receivable, risk management and insurance for a business. The financial management system for a small business includes both how you are financing it as well as how you manage the money in the business.
In setting up a financial management system your first decision is whether you will manage your financial records yourself or whether you will have someone else do it for you.
Bookkeeping refers to the daily operation of an accounting system (recording routine transactions within the appropriate accounts). An accounting system defines the process of identifying, measuring, recording and communicating financial information about the business. A bookkeeper compiles the information that goes into the system, and the accountant takes the data and analyzes it in ways that give you useful information about your business. They will be able to advise you on the systems needed for your particular business and prepare accurate reports certified by their credentials.While software packages are readily available to meet almost any accounting need, having an accountant at least review your records can lend credibility to your business, especially when dealing with lending institutions and government agencies.
The most crucial part of your small business will be setting up an accounting system, collecting bills and paying employees, suppliers and taxes correctly. Unless you are well versed in accounting and bookkeeping, this is likely to be your nemesis if not handled appropriately.
The basis for every accounting system is a good bookkeeping system. What is the difference between that and an accounting system? Think of accounting as the big picture and bookkeeping system as the nuts and bolts of your business. The bookkeeping system provides the numbers for the accounting system. Both accounting and bookkeeping can be contracted out to external firms if you are not comfortable with managing them yourself.
Even if you outsource the accounting functions, however, you will need some type of recordkeeping systems to manage the day-to-day operations of your business – in addition to a financial plan and a budget to make certain you have thought through where you are headed in your business finances. And, your accounting system should be producing Financial Statements. Learning to read them is an important skill to acquire.
There are also several financial software options to choose from such as Peach Tree, Quicken and QuickBooks. We recommend trying the different types of software out and see what works best for you. Some software can work directly with your online registration software and your bank, so it’s best to investigate those options to save time in the future.
Clearly, financial management encompasses a number of crucial areas of your business. Take time to set them up right. It will make a significant difference in your stress levels and in the bottom line for your business.
-Stephanie Beveridge and Carrie Harris