Your small business is making money, clients are paying you, and you are starting to build a bit of savings. How do you keep track of it all? Careful bookkeeping, that’s how! This might not be the most fun aspect of owning a business, but diligent bookkeeping can can save your skin if the going gets tough. Besides, if you know how to balance a checkbook, then you are pretty well set to keep track of your small business’ books.
Keep careful track of your business records, systems and procedures, and internal controls. Business records include invoices, bank accounts, receipts, tax returns, time keeping, and assets. Systems and procedures include billing, deposits from clients, relationships with vendors and banks, collections, rainy day reserves, a payroll cycle, and accounts records. Internal controls include staffing and are much more case by case. For instance, you might decide to let everyone on your staff have access to spending – you probably shouldn’t, but you can – whereas your business neighbor only allows for their bookkeeper to have access to any spending accounts.
If you are wondering what to keep track of in this situation, the answer is that you cannot keep track of too much. Business driving, all lunches and receipts for supplies, time reports down to the quarter hour, etc. How long should you keep track of these things? Indefinitely. Tax returns should be held onto for the life of the business, and while receipts have a three year life span according to the IRS, you can hold onto those for forever, too. Afterall, if worst comes to worst, it is much, much better to have these things on file than to not. You can always move these records off site if you run short on room.
While all bookkeeping is meant to help you keep your accounts and money in order, and to keep them current with what the banks say, it is also meant to help you get an accurate view of the future and plan for it. Building up a rainy day reserve is massive for the security of your business and your employees. Most suggestions are that this reserve should be 2-3 months of all operating costs: payroll, rent or lease, utilities, etc. Keeping careful track of your payroll cycle will also help with this as getting into a cadence for paying employees helps set up a long term schedule and budget. Keeping good relationships with both clients and the folks you owe money to is important. Not all clients will pay you on time, but getting angry or aggressive with them won’t help things. Likewise, if you are short on funds and can’t pay the full cost of a service, talk to that vendor and work out a way to pay that works for both of you. Damaging relationships can have about as much of a negative impact on your company as doing shoddy work.
Again, these can be as stringent or loose as you want them to be, but we would definitely recommend a tighter approach, especially at first. Included in these controls is how much of a staff you have. Remember, you can always hire contractors to absorb some of the workload when you take on a bit more work than you have staff – this is a good problem to have. A contractor can always turn into a permanent hire, and using them as a contractor is like a long term job interview. Keep careful track of your money, who is spending it, what it is being spent on, and where your income is coming from and you will be just fine. You can always hire a bookkeeper when the time comes to help alleviate some of this stress.