Have you ever wondered how a small business bookkeeper handles the bookkeeping for their own business? Think about it, if you are using an outsourced bookkeeping service they have to handle their own business bookkeeping. Ask them what they do for their own bookkeeping that you currently are not doing. Here are five key things I do with our own small business bookkeeping.
Owner in control
I'm in control of our business bookkeeping. While I may not handle every aspect of it like creating invoices and posting payments I have the correct checks and balances in place to ensure the accounting is correct. Nobody can move money, process payroll, or pay bills except for me. Those are just good accounting practices.
Many owners that outsource their bookkeeping or have an internal bookkeeper put too much trust in them. The more sensitive permissions you give your bookkeeper the more likely it is that they will steal from you. Bookkeeper theft is a major problem right now.
Here are a few things your bookkeeper should never be able to do:
- Sign checks, pay bills or transfer money
- Have unlimited access to your bank account
- Have access to your bank account numbers
- Have access to your social security number
These may seem like common sense things but quite often I have business owners try and give me this information. Once we explain why we can't take this information they get it.
I update our bookkeeping at least once per week but often daily. When you update your books daily you catch things faster and your books are always up to date. I showed one of our clients how to reconcile the books daily and he was blown away. He said he didn't understand why his previous bookkeeper didn't show him this. When I told him to have his bookkeeper handle the daily reconciling he objected. He said he wanted to do it himself as it only took a few minutes, he had complete control over his books, he knew what was going on at all times, and caught mistakes early.
When you reconcile daily you have a really good handle on cash flow. By printing checks and entering transactions before they post to your bank account you really get an understanding not only of your current cash balance but also your future cash balance. Daily reconciling makes you the king of managing your cash flow.
I have a tradition to email my CPA three QuickBooks files on January 1st each year; our business and my wife's two businesses. It probably takes me 15-20 minutes to finish the books for the year and email them off. The reason is because my books are always up to date and yours should be too.
Another thing about my books is they are always accurate. That doesn't necessarily mean I know how to handle every single transaction that happens on our books. Every once in a while a transaction comes up that is complex enough that I need to advise with my CPA. When you don't know what to do with a particular transaction don't just bury it in a random account. You should code all questionable transactions to the QuickBooks ask my accountant code. That way you can keep all of your questions organized in one spot. Make sure to add as many details as possible to the memo so when you do get the chance to review them with your CPA you have sufficient information.
It is really frustrating to me knowing how many small business owners don't set goals for their business each year. It is really important to create a budget and forecast each year. Here are some guidelines for building a small business budget.
After you build your budget you should enter the budget into QuickBooks. This makes budget vs actual comparisons really easy. Having this information at your fingertips will allow you to quickly see if you are on track for the goals you have set. If not make the necessary adjustments to get back on track.
Key metrics and reporting
There are certain key metrics and reports that every business owner keeps an eye on; either consciously or subconsciously. I definitely have my 3 or 4 key metrics that I watch every month. If they get out of line I figure out the cause and try and make the necessary adjustments to bring them back in line with my goals.
Another important part of any small business owner's job is to analyze financial reports. I have a series of reports that I have memorized in QuickBooks to allow me easy access to vital reporting information. Way too many small business owners operate without any financial analysis. Doing so is like running your business blind. You can't analyze your key metrics and financial reports unless your bookkeeping is updated, accurate, and you have set goals.
What small business bookkeeping tips do you have?