Being able to successfully track financial information is critical when it comes to the success of your small business. Even if you aren't an experienced accountant, there are some simple tips and tricks that you can use to avoid financial disaster and establish correct accounting principles within your business model.
Here are three things that you need to do to ensure the success of your small company's accounting practices in the future.
1. Separate payments from borrowed funds.
Many small business owners make the mistake of thinking they only need to track two types of funds: incoming and outgoing. This narrow thinking could get you into trouble when it comes to separating what belongs to your business, and what needs to be repaid to an outside investor.
If you have accepted borrowed funds from an investor to help finance the startup costs for your company, these funds should be kept separate from your receivables to avoid confusion as you repay borrowed funds and evaluate the total value of your company in the future.
2. Don't let customers carry a balance.
It's important that you establish financial policies that don't allow customers to carry a balance on their accounts. As soon as you make a sale, the value of the sale will be logged in your accounts receivables ledger.
Although you may see a large number in the accounts receivables column, this influx of cash only benefits your company once it has actually been deposited into your bank account. Making it a policy not to let your customers carry a balance on their accounts ensures that you will not let unpaid bills skew the accuracy of your financial records.
3. Reconcile accounts weekly.
Many small business owners make the mistake of waiting until their bank statements arrive to reconcile their accounts. If your company is engaged in multiple transactions throughout the course of a day, you could amass an overwhelming number of transactions to wade through on a monthly basis.
Pulling up your financial information online and then reconciling your accounts weekly allows you to audit a manageable amount of information. You can also catch mistakes immediately to avoid unnecessary complications when it comes to correcting accounting errors.
Being able to successfully establish a working accounting system will help you ensure the success of your small business. Take the time to separate payments from borrowed funds, prohibit customers from carrying a balance, and reconcile your accounts weekly to help eliminate accounting problems in the future. If you need more assistance, accountants like Teri J Henderson, CPA, P.A. may be able to help meet your needs.