Tasks Every Small Business Owner Should Be Doing – Part 1
Are you a small business owner behind in your bookkeeping?
Ever wonder whether there’s a better way to be doing things?
Ever wonder if what you’re doing is what you’re supposed to be doing?
Let’s face it, you didn’t get into business to be a finance expert – you went into business to provide a product or service to your customers and the last thing you wanted to be taking up a lot of your time is bookkeeping.
Maybe you’re just starting out and money is tight, so you have no choice but to do it on your own. Or you have a spouse that is doing the books. Either way, I’m going to try to help you understand what it is that you should be doing every week.
On a Daily Basis
Start each day by checking how much cash you have available. Since cash is the fuel your business runs on, you never want to be running on empty or close to empty. Review what income should be coming in and compare it to upcoming bills and expenses.
1) Record all Transactions
Whether you’re using a spreadsheet or accounting software, it’s important to stay consistent and stay on track. Record all transactions every week or every day depending on volume. While many new businesses tend not to initially invest in accounting software, it’s much easier to implement software at the onset of a business than t is to do it after a couple years of operation. Given the how much the cost of accounting software has dropped over the past couple of years, it is much more affordable now than ever before. In addition to desktop software, there is a myriad of cloud-based software available on a subscription basis.
2) File Away Paperwork
Once you have entered all your transactions, it’s important to file them away in an orderly fashion so that they can be easily retrieved in the event of an audit. Many accounting software packages now offer scanning options for receipts and other documents, however, paper copies may still be required by the CRA if they ask for them (depending on what type of business you operate).
3) Review Unpaid Bills
As a small business owner, you may have a combination of paper and electronic files. Either way, ensure that you have a file labeled “unpaid vendors” and sort the invoices by the due date. Take advantage of early payment discounts when available, if your cash flow allows for it.
4) Pay Bills
Ensure to pay bills on time to avoid interest charges for late payment. Vendors may revoke your payment relationship and require you to pay in full up front if you are consistently late in paying them. Ensure you keep good relationships with your vendors. Be sure to keep payment confirmations whether payment was made online or by cheque. Note the date of payment and cheque # or online confirmation # on the invoice for future reconciliation purposes.
5) Create and Send Invoices
Be sure to invoice all customers for work that has been completed. Don’t forget to include payment terms on invoices to ensure you can properly forecast your cash flow. Forecasting helps identify when to expect income to be able to pay for invoices.
6) Review Cash Flow
Managing cash flow is critical for every business. If you don’t have enough cash to pay vendors, your operations may suffer. Cash flow forecasting can help you make informed and timely business decisions. Click here to download a customizable Excel version of a Cash Flow Statement (courtesy of QuickBooks).
You may have had no choice but to do your books yourself when you initially started your business, but now that business has picked up and you’re starting to pull in a consistent income, the time you have to dedicate to your books is limited and it seems like it’s gotten out of control. If that’s the case, then you need to seriously consider in a bookkeeper to at the very least keep your annual taxation bill down and avoid a nightmare audit.