Your accounting system is the eyes and ears of your business. Accounting systems are essential for reporting profits, expenses, sales, income, and more. The trouble is, many small business owners neglect their accounting systems. If you are not regularly managing your accounting system, you may have tremendous exposure to problems you are not even aware of. A good accounting system can be your best business partner, alerting you to issues that need to be addressed and keeping you apprised of your successes.
Just like any business activity, accounting needs to be an action that you schedule in your calendar and spend time on every week. Depending on the size of your business, you may need to hire someone whose full-time job is managing the accounting for your company. You may need only a part-time bookkeeper, or you may need a full accounting staff, dividing responsibilities into payables, receivables, cost and inventory accounting and reporting.
If you run a small business, you may be able to use an accounting service. There are plenty of part-time bookkeepers out there who will visit your business on a weekly basis to keep track of your books and make sure that you are current on paying bills and depositing receivables.
If you do your own bookkeeping, make sure to invest in software that can do a lot of the work for you. QuickBooks is the best example of bookkeeping software that can provide reports such as income statements, balance sheets and general ledgers and have tremendous flexibility to track any number of bank accounts, vendors, transactions, receivables and payables.
It’s important to understand the difference between a bookkeeper and an accountant. A bookkeeper does just that. He or she manages your books, writes checks and deposits money into your bank accounts. The bookkeeper can generate reports that tell you where you stand. A good bookkeeper can analyze those reports and alert you to potential shortfalls or expenses that are out of line. Remember, your accounting system is the most important diagnostic tool you have to analyze the health of your business.
Your accountant, who should be a CPA, will file your taxes, handle any government regulatory filings and produce annual statements with analyses. Your CPA should also be a business analyst who can be straight with you about the financial health of your business. CPA’s can be expensive, which is why if you are a smaller business, you are often fine using a bookkeeper for day to day accounting and save your CPA fees for annual reporting and tax filings.
So if you are still stuffing receipts into coffee cans and scribbling notes in your check register, and the bank statements are piling up in your office, make a commitment today to get your accounting system under control. Once you make the effort to implement a good accounting system, it’s easy to keep up with it, and you will have the information you need to make good decisions about the future of your business.
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