Every entrepreneur must balance running their business with maintaining the books. Falling behind here hinders business growth, enables fraud, and may frustrate customers and vendors if invoices and payments are delayed because of spotty accounting practices. Not to mention the nightmare that tax season becomes.
Follow these 7 simple steps to streamline your accounting and improve the efficiency of your business.
Table of Contents
1. Keep Things Simple
Whether you’re running an online business or you’ve just opened a physical repair shop, the simpler your accounting is, the better. You may have the best intentions when setting up what you’ll track and how you track it. But if it’s too much to keep up with or too cumbersome to document, that plan will quickly go out the window.
On top of that, when accounting is too complicated, it takes longer for you to get to the information you need. You may have to dig through multiple documents and scan large files. So do yourself a favor. Plan this out and plan to keep it simple.
2. Leverage Automation
Automate anything you can in the accounting process. Not only does this reduce errors. It will save you a ton of time. Sometimes, when looking at the price tag on AP automation, it’s hard to see the value until you start using automation software and realize how much it simplifies your business and life. You’ll be more productive and better manage relationships with the vendors who make running your business possible. Stronger vendor relationships can pay you back in so many ways.
3. Have a Dedicated Expense Card
This is particularly effective if you’re running a tiny business where you make all the purchases. Put them all on one card so that it’s easy to transfer them to your financial documents without digging. Ideally, this should be a credit card with a decent limit. Now, you’re earning points on your business expenses and have the funds now for more costly repair or replacement costs when there’s a lag in accounts receivable or revenue generation in general.
Any entrepreneur should be careful with credit and not overextend themselves. But at the same time, you need the flexibility to keep your business running.
4. Check Your Books Monthly (at least)
How often you check your books really depends on the size of your business. But some of us entrepreneurs run a one-person show with a couple or no employees or contract labor. It can be tempting to put off bookkeeping while you focus on other aspects of your business. But regardless of the type of business you’re running, you need to at least look at those numbers monthly to make sure you’re on track, even if you have someone else managing your books.
5. Limit Access
No, everyone in your business should not have their own expense card, regardless of how trusting the employee relationship is. It doesn’t matter if you’re working with your brother-in-law or your pal you’ve known since high school.
Limit who has access to your accounting and ability to spend. And in a tiny business, that person should probably be just you, even if it’s a little inconvenient at times.
Entrepreneurs just starting out often experience a higher risk of fraud because they trust the people they work with, and that may not be checking their books regularly.
If you share devices, servers, or cloud storage among several employees, make sure your accounting folder is locked to your eyes only. If you do accounting in physical ledgers, lock those up in a file cabinet.
But ideally, in 2021, you’re going paperless.
6. Backup Everything
If you are keeping your financial documents on a device, make sure you’re backing them up regularly. Devices can fail, and with them, all your financial documents. This can devastate a business and make tax time brutal.
7. Consider Hiring a Bookkeeper
Let someone else do the Bookkeeping. It can be well worth your while. The average bookkeeper makes about $20/hour, which may go up as wages are on the rise. But it’s still cost-effective for most startups.
You’ll know it’s being done right if you vet this person. Bookkeeping is likely to be done more regularly, so you have access to numbers you need to make more informed business decisions. And you just freed up your time to focus on what you do best, running your business.
Hiring a bookkeeper also supports business growth. So, even if you feel like you can’t afford a bookkeeper with current revenues within a short time, the benefits of having a bookkeeper can increase revenues and help you maximize profits.
About Carson Derrow
