Last week I started a series to address simplifying the back office of your business. If you own a business, you are going to have back office functions that need to be taken care of. Bookkeeping, taxes, regulations, information management, social media management, human resources…and the list goes on.
From my experience, managing the back office is one area that business owners can really struggle with. Back office work can be tedious and is not always the fun part of running a business, meaning that often back office tasks are regulated to the back burner.
An Excerpt from the Back Office Series Post #1“Part of the issue is that we often view back office work as only dealing with annoying administrative tasks, but the truth is, the back office is what runs your business. The back office is the engine (the guts) to your car. It is what makes the car run. The better you take care of the engine, the better performing your car will be. Time after time I have worked with clients who, for one reason or another, failed to tend to the engine of their business from the beginning. What resulted, was wasted time and energy looking for needed information, that was not in the right place or useful at the right time. The resulting mess required hours, weeks and sometimes months of clean up.“
One of the key areas that a small business owner must, must, must (Did I mention that they MUST) handle well, is their financial bookkeeping. This is a key area that I have seen business owners neglect and later find their business books in a mess. They may have held onto every receipt, even kept it ordered in an envelope, a folder or a box and think “I’ll get to that later.” Unfortunately, later rarely comes.
If business owners could grasp how much time and resources are wasted by not keeping up with their bookkeeping, they would be quick to address this area of their business. Your financial books tell you how your doing, where your money is going and what your profit looks like. Without knowing your numbers, how can you grow your business successfully?
So, where do you start?
Here are key areas to address in your bookkeeping:
- Set aside time each week to work specifically on your bookkeeping.
- Take an hour at the end of the day or set aside time at the end of the week to focus specifically on your bookkeeping.
- Choose a bookkeeping software to keep your books up-to-date. Quickbooks, Fresh Books, Zoho (To name a few)
- There are a number of good bookkeeping software’s on the market – some traditional and others internet cloud based.
- Take time to learn your bookkeeping software.
- It may be well worth hiring an experienced bookkeeper to help you get your books set up appropriately. This is key to keeping your business books in good order.
- Decide if you will purchase the software or go with an online version.
- Track all your expenses, income, customers and vendors diligently
- Keep all your receipts and track all invoices – both accounts payable & receivable
- Tip: If you are on the road a lot, put a small manila envelope in your vehicle to hold all your receipts, making sure to mark each receipts appropriately before placing in the envelope. This makes your work quick and easy when it comes time to enter the receipts into your software.
- Once entered, file all receipts and invoicing. Most records need to be kept for 7 years or until the period of limitation (Set by the IRS) has expired.
- Keep Business accounts and Personal accounts separate (You would be amazed how many people don’t)
- When you start your business you will want to open accounts specifically for your business. Be diligent to keep all money, expenses and income separate between the two.
- Hire a reputable accountant
- Unless you are planning to handle monthly, quarterly or end of the years taxes yourself, you will need an accountant at different times through the year to help you with any questions and filings for taxes. Ask for recommendations from friends and fellow business owners.
There are many aspects to keeping your books clean and up-to-date. The above suggestions are simply to get you started down the right track. The key is to maintain your business books from the start. Even though the work can be tedious at times, regular upkeep of your books will potentially save you hundreds of dollars and keep you from having to pay someone to come in and clean up your books later.
What questions do you have when it comes to keeping your business financial books? Are there key things you would add to my list?
Keeping it Simple,