Bookkeeping, finances, revenue - these are all terms, among many others, that tend to be intimidating for many small business owners to tackle. Keeping track of accounts receivable, billing, collections is also an arduous task for many. The main problem tends to be that a lack of attentiveness in the financial health of the business is detrimental, and leads to many costly errors that are often easy to avoid.
Implementing a robust accounting strategy may initially seem like an insurmountable challenge, but it is not as difficult as it may seem.
By looking at each individual aspect of the accounting business, and asking yourself some questions associated with each, this is already a big step.
Some questions may seem easier to answer than others. For the ones that pose a challenge, think deeply about why that challenge exists, and what steps you could take to make answering that question easier the next time around - this will become the foundation of your accounting strategy going forward.
Here are some of the areas that should be given careful attention in small business accounting, and important questions you should be asking yourself for each one.
As you probably already know, bookkeeping is all about the details. Revenue tracking may not seem like it is all that important, but those small decisions we overlook tend to snowball into large errors very quickly.
- How will you view your books?
- How will you get paid? Will you accept online payments?
- How will you keep track of your expenses?
- How will you keep your business in the black? (Budgeting)
By putting some small measures in place, you are ensuring that the rest of the financial process will become easier to handle.
No business will thrive without proper payroll practices in place. Employees need to be compensated for their time in a consistent manner, that much is certain. However, there are other questions associated with that aspect that must also be considered:
- How will you handle payroll?
- Will you offer payroll benefits?
- How often will employees be paid?
- Will they be salaried or hourly?
Payroll benefits are a good incentive for employees, while also allowing you some breathing room when it comes to taxes. Similarly, there are pros and cons to the frequency of payments, as well as whether they should be salaried or hourly that must also be considered.
Taxes are an unavoidable and time-consuming process - and unfortunately, they're inevitable. There are ways of making it easier on yourself, however. Figuring out what your obligations are to begin with is vital, as well as ensuring that you are paying the right amount.
- How will you determine your tax obligations?
- How will you know if you're overpaying or underpaying?
- Are there automation systems in place
And if it becomes difficult to manage, consider automating certain processes to make it go smoother, or outsourcing to save yourself some resources in the long run.
Banking is another one of those small issues that tends to grow in size if ignored. Using a credit or a loan comes with obligations, so it is important to work with a bank that is right for your business.
- Where will you keep your accounts?
- How many bank accounts will you have?
- Will you use a line of credit or a loan?
Keeping your personal and business account separate is also incredibly important, so it might be worth considering using different banks to reduce the temptation to blur the lines between the two.
Financial reports are absolutely paramount to a successful business - as is reviewing them regularly. Set up key performance indicators, establish a baseline and then use that to measure success going forward.
Regular financial report reviews will help you spot irregularities and errors early on:
- How will you generate reports?
- What reports will you be viewing?
- How often will you be viewing your reports?
There are many different indicators you can establish that will work with your business needs, and it is imperative to be disciplined in reviewing these. Whether it is monthly, quarterly or somewhere in between - regular financial report reviews will help you spot irregularities and errors early on.
6) Systems & Workflows
Establishing a system and workflow will not only help increase the success of your business, especially once it is streamlined, but it also helps keep employees accountable. Some questions to ask here are:
- Who will be entering expenses?
- Who will be generating invoices?
- Who will pay the bills?
- Who will generate reports?
Creating distinct responsibilities for your financial team will help in keeping track of important financial aspects, but will also give your employees a defined scope of work that will help them succeed.
Small Business Accounting Consultation
These are just some questions to think about. If you are struggling to answer any of these questions, then it might be time to create a new accounting strategy. We are happy to help in this process, so please do not hesitate to schedule a free, no-obligation consultation by calling our office at 405-759-2796 or scheduling your free consultation online.
Alternatively, for a complete overview and step-by-step guide on how to manage each of these areas, download our free guide: The Small Business Owner's Guide to Accounting.