By Roberta M. Fisher, Gadd Business Consultants
First, establish a financial system for your business that will clear out the garbage if you want to see your business succeed. The system that you set up should be able to give you accurate information so you can see how your business is progressing and also so you know when to act upon a trend either good or bad.
These five steps will assist you in forming a simple financial record-keeping system: capture, check, record, review and act.
Capture the Information
You must get in the routine of capturing everything as you start your business. “Capturing’ is the most difficult and it is also the most important part of your financial recording. Be sure to track every amount that is spent on your business and every amount that is business revenue from sales. Make sure you always keep your business and personal expenses separated. Each capture should include a description of the item, the amount and date of the transaction.
Check to Make Sure the Information is Complete and Correct
Make sure to set aside time every two weeks to go through everything that has been captured to make sure all the information is ready for recording. Be sure you provide enough detail on what the expense was about before capturing. Do not wait too long or it will be harder to remember the information needed.
Record the Information to Save It
Recording means placing your financial information into a practical form. After everything has been checked, be sure to have it recorded at least monthly. Online software is the easiest form of recording and it also allows you and your bookkeeper access at the same time in order to discuss it if necessary.
Consolidate and Review the Information
When all the records have been recorded, at the end of the month print out the following four reports: balance-sheet, income statement, profit & loss, an accounts aging report, and an accounts payable report.
Act Based on What You Know
Create trigger points where the information may compel you to look closer at the data entered. If you see liabilities are on the rise for three months in a row, you will need to act by cutting down on expenses. If a particular expense is increasing as a percentage of sales, ask the question why? You may need to cut spending in other areas in order to maintain your profit level.
Be diligent on going after late or non-payers that continually show up on your aging report. The longer the debt goes on the least likely you are to collect on it. Set up a collections system to ensure you are getting paid on time.
Pay account payables as soon as you can. You may receive discounts if you pay the invoice early. If you are unable to pay all your bills be sure to pay the ones that you will incur a penalty on. Late payments can and will ruin your credit rating.
The Bottom Line
Remember: Capture all financial information, Check it every two weeks, Record and Review the monthly information and Act when and if the data is telling you to make a change. A well-organized financial system should keep your business viable for many years to come.
Reference: https;//www.the balancesmb.com/business-record-keeping-system-397850