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.
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As businesses grow this question will eventually get asked; when is it time for bookkeeping help? What specific events triggered this question and how long the business has been operating prior to asking always results in several long answers. I'll try and summarize a few of these answers from recent inquiries Salt Lake City Bookkeeping has received. Ideally, all small business owners would realize that bookkeeping is the first thing you do when you make the decision to be in business and work for yourself. I once thought bookkeeping would be started once the business bank account gets opened. However, I've shifted my thought process on this because it should happen even sooner than that since the owner usually is using personal funds to get things started. Anyways, only a small percentage of our clients have reached out prior to starting their business, so we rarely see this proactive approach. A majority of small business owners don't realize the importance of bookkeeping until a certain event has happened or they realize wearing too many hats is negatively affecting their business.
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Many business owners have the mindset that they don't want anything to do with the bookkeeping process of their business. They find it to be a nuisance and a waste of time. However, ignoring your business bookkeeping altogether is the equivalent of running your business blind. Neglecting your bookkeeping leaves your business vulnerable to theft and fraud as well as possibly exposing you and your business to tax related problems down the road. I understand why many business owners dislike bookkeeping. Many owners hate the task of bookkeeping, while others see it as time they could spend growing their business. However, if you set up your bookkeeping processes correctly you can stop handling your day to day bookkeeping but still remain in control of your business finances.
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Not sure why, maybe I'm naive, but I'm always stunned when I hear of a bookkeeper or treasurer stealing money from the firm they are working for or volunteering for. Without the proper checks and balances put in place, your bookkeeping system could be set up to allow for theft and pilferage, and it could be happening right in front of you. In the past few weeks, I've come across a few different stories of businesses and non-profits getting taken for a ride. One story came from my hometown in upstate New York and the other from where I currently reside, which is here in Utah. I feel situations like these can be avoided if the proper time and effort is put into building a strong bookkeeping system and utilizing the checks and balances that are associated with this. As a business owner or manager, you want to be able to whole heartedly trust the person managing your money and you want to be able to identify areas where money can disappear. If you don't, then you might want to take the necessary steps in changing that.
Empower Your Bookkeeper
Cash is king, but many businesses fail to put the proper bookkeeping procedures into place when handling cash. Business owners tend not to take care when handling cash payments and disbursements within the business; however, that does not sit well with the IRS. Weak bookkeeping systems that do not use the correct procedures for handling cash are also very vulnerable to internal theft. If your bookkeeping system is set up properly it can ensure that your bookkeeper is not stealing from you. I'm going to focus on handling cash payments from customers and cash disbursements out of the business, which is essentially petty cash.
Cash Payments From Customers
Is your bookkeeper stealing from you? Do you have doubts? If you are still reading, maybe you are just curious. Or maybe...
All too often, I hear the story of the business that got swindled out of a lot of money by their bookkeeper. My first thoughts are usually: How? And why? Here is my advice on how to make sure your bookkeeper is not stealing from you.