Posted by : Amanda Stein Tuesday, July 23, 2013
Dreams of running a business usually omit the back office business processes that require a great deal of time and attention. Bookkeeping is the discipline of keeping track of every penny that is earned through sales of products and services. Expenditures are tracked as checks are written. Independent accountants will perform this function, but the hourly rate for an accountant’s time is much more expensive than a bookkeeper’s time. Business owners have many options to address the business needs for a bookkeeping system that can keep pace with the business.
OPTIONS FOR BOOKKEEPING
Certain milestones within the business plan will reveal when the business would have sufficient cash flow to step up to the next option on this list. Trusted advisers will provide insight for each option, which will provide additional services and cost more money.
• Manual bookkeeping system – Remarkably, a set of bound books is used in some businesses from the outset. Knowledgeable business owners like to “see the details” associated with every transaction. This is a time-consuming option in the 21st century.
• Software – Affordable software packages can be purchased for installation on the office computer. Upgrades must be purchased each year to receive technical support from each company. Data on the computer must be backed up at regular intervals to an off-site service to prevent loss. Less than 10 percent of all businesses survive the loss of the business data.
• Cloud software – Central processing has been around for decades. Web-based accounting software has functionality to access bank account transactions. Automated entries reduce the amount of time required to update the computer software each week. A growing business will create more entries each week.
• Independent bookkeeper – Certain types of small businesses will benefit from the professional association of a bookkeeper who offers services with low overhead. This affordable option is helpful for the business owner who participates in the revenue-generating activities of the business. Most bookkeepers use a popular software application that offers reports and acceptable controls on the data.
• Bookkeeping business – Rapid growth can be handled by larger business entities that offer many different services, including human resources and payroll. Many business owners discover that the services offered are more affordable than hiring full-time employees to conduct these necessary functions. Keeping pace with constantly changing laws and regulations can make a bookkeeping business an invaluable business partner.
• Full-time employee – At some point in the company growth trend, a return on investment study will reveal that full-time employees are necessary. This step should be postponed as long as possible because of the expense associated with creating full-time jobs.
CAUTIONS ABOUT BOOKKEEPING
Few people consider the importance of maintaining absolute control over the company’s finances. Bookkeeping processes perform the manual tracking of transactions that take place throughout the life of a business. Decision makers must follow these basic activities with important validation steps.
• Check writing – The business owner must remain the only person authorized to sign checks for business expenditures. Close attention to check requests will allow the decision maker to control the business cash flow and refuse unauthorized expenditures.
• Weekly review – Specific deadlines must exist for the completion of the bookkeeping tasks. Businesses cannot be run accurately without up-to-date information. A complete set of reports should be created to reveal the business activities of the previous business week. Business owners are wise to learn to use the software independently to ensure every entry is valid.
• Monthly reports – Extensive reviews of previous month will ensure that the money is handled appropriately. Comparisons to the business plan and budget should be part of these important meetings.
• Internal audit – Occasional calls to suppliers, vendors and creditors will provide peace of mind for the business owner. Bookkeeping activities can be validated at any point in the process with a simple request for information. Requests for additional reports and information should be met with openness and rapid response.
• Accountant review – At times, the accountant will ask for changes in the company bookkeeping practices. Professional CPAs are adept at identifying missing pieces that will cause problems at tax time. The business owner should ask the accountant to offer suggestions that would make the business books more accurate and useful.
BUSINESS OWNERS MAINTAIN CONTROL
Assistance from a skilled bookkeeper does not erase the business owner’s primary responsibility for understanding and controlling the business funds. Back office functions can be mastered with the assistance of knowledgeable professionals. The importance of devising a personal method for validating the entries cannot be overemphasized.
This post comes from Pure Bookkeeping, a bookkeeping system that can assist bookkeepers trying to save time and effort.