Setting up your perfect (and simple) Accounting System
My friend Donna Hyatt asked me to write a special article for her clients on why business owners and entrepreneurs get stuck and continue to play small. I share that article with you here. For more information regarding Donna’s coaching, check out her website at http://hyattcoaching.com/
Now that tax season is over, it is a perfect time to create and fine-tune your bookkeeping and accounting systems so that next year’s process will be a lot easier. If you’re like some, you wait until the very last minute and then scramble to get everything together and organized. You sort your business paperwork from your personal-or maybe not. Then haul the whole lot to your accountant for his/her magic. Let me reassure you-there is NO Magic. It is very costly for you to rely on your accountant to perform these functions. AND it kept you from having the information that you needed throughout the year to make important decisions.
Make this year the year that you truly step up to becoming a true business owner. Business owners make hard decisions all the time; the decision to create a true accounting system should be an easy decision. This special report is a reminder that the system doesn’t have to be difficult.
So let’s use the following seven steps to review how you handle your business’ income and expenses.
1. Separate your business from your personal transactions. There are a number of good reasons that you absolutely must separate your business records and transactions from your personal income and expenses. We keep records and reports for two major purposes: governmental regulations, like your tax return; and management purposes. Both purposes require that you keep separate transactions and funds.
2. Organize your paperwork and your file folders. Know where to find a document simply and quickly; reach out and find your customers’ contact information; or locate the contract and details of a large purchase. You cannot afford to operate with little or no organization of your paperwork and transactions.
3. Create a sales and receivables system to track your customers’ purchases and contact information. You need to know who your customers are, how to reach them, what they purchased from you previously and what they paid. As you grow, it’s impossible to keep this information in your head. You will also want to track any money that your customers owe you and set up a receivables process.
4. Track your purchases, create a bills payable flow and create a cash-out security system. Do you know what you spend your money on? Once you start tracking how you spend your money, it can surprise the heck out of you. You also need to track your debit and credit card purchases as well as any accounts owed to vendors.
5. Automate your steps to save you time. The use of commercialized accounting software is a huge time saver. It can take some time and effort to learn, but well worth your investment in time, energy and effort in the future. Many business owners contract the monthly work or hire someone to help. Be sure not to abdicate your responsibility of being in charge of your accounting system.
6. Understand your Chart of Accounts and know how your daily transactions flow through your chart of accounts into your financial statements. Your chart of accounts is simply an organizational tool that helps accountants summarize where your income came from and what you spent your money on. It is divided into five major types and determines what your reports look like.
7. Learn to read your financial statements. With or without accounting software, you should be reading and understanding reports every month-if not more often. The specific reports that you choose to use on a regular basis depend on your business. At a minimum you should be reviewing your Profit and Loss report, your Balance Sheet and your Cash Flows Statement or Forecast.
Although there is NO Magic, the seven steps are simple-they may take a little time, your interest and your commitment. And, we are making your learning curve as easy as possible. Check out the numerous special reports, audios and self-study programs at www.Marie-Gibson.com. Make this year, the year that you truly move forward in a powerful way. Take charge of your accounting system so that you can turn your hard-earned revenues into profits and growth. If you need additional personalized help, we would be delighted to visit with you regarding your special needs.