Most small-business owners are not excited about handling the financial recordkeeping for the business, which should come as no surprise.
Instead, business owners often put it off until later and, quite often, the “later” means tax time.
Not keeping good financial records can result in a multitude of problems. At best, you may not maximize your return on investment. But the worst thing might be having to close the business and owing money to family, friends and even governmental agencies.
Letting all of the other requirements of your business eat up your time is easy to do. You know you have to keep the shelves filled. Working with customers is a priority. And you must make time for marketing efforts. Plus, you must take family and personal time into account.
All of these time demands means that recordkeeping and accounting are pushed aside to be done later, at best, or not at all.
Letting the financial details of your company slide must be avoided. Keeping the company on track means staying on top of the financial details, just as you do for all of the other parts of the business.
Good financial tracking and recordkeeping helps:
• Protect against fraud
• Make sure bills are paid on time
• Keep accounts receivables from getting out of hand
• Maximize your return on invest
• Ensure that you make estimated withholding, Social Security and other required deposits
• Monitor expenses to keep costs under control
• Estimate cash flow so you can use excess cash the best way possible but also know when you might need a short-term loan
• Control costs
If you are going to do your own financial records, the best way is to set aside a time each week to devote to the task. Then develop a system for what tasks need to be done at what time.
With technology, some of the tasks can be made very easy. However, a tendency is to assume that with technology in place, mistakes and safety also are covered. This is a fallacy. Even with technology, the owner must remain diligent regarding the financial situation of the company.
Another route many owners take is to get professional help in this area. This can be a great option, but again, the owner must stay alert and monitor what is going on. This means that you must understand the general process to know when something looks wrong. Ask questions and do some spot checking on your own.
Small-business owners often report that two key elements help them keep track of the finances. First, the small financial details quite often are what get a company into trouble. Second, keep it simple. You can have an incredibly complex system, but if it keeps you from keeping up, you are perhaps worse off than before.
Finances are as important as customers coming in the door. Make sure you take care of your finances.
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Glenn Muske is an independent expert on rural small business, working as GM Consulting – Your partner in achieving small business success. He provides consulting, and writes articles for county extension agents and newspapers across North Dakota. Previously, he was the Rural and Agribusiness Enterprise Development Specialist at the North Dakota State University Extension Service – Center for Community Vitality.