Managing the books
Morris Kaplan, one-time stockbroker and venture capitalist, brings his finance skills and recent experience as a business journalist and writer to IT, with a special interest in telecoms and how communications is being transformed by technology.
Take the following steps to ensure that your business’s bookkeeping doesn’t become an overwhelming burden
Sometimes technology can confuse even the technology-savvy IT contractor. Consider that many independent contractors and small businesses use a generic chart of accounts for their bookkeeping. But if you’ve just bought an accounting software package which is going to be generic, bookkeeping becomes unnecessarily burdensome as you try to fit transactions into an incompatible account structure. At that point even the most adept technology-savvy contractor can throw their hands up in despair.
Simplifying the bookkeeping
A fast-moving technology service business will, typically, be increasing the number of credit accounts, credit cards and subscription or vendor accounts that it uses. Too many accounts can complicate bookkeeping. One way to avoid over-complicating is to streamline your credit and transaction accounts and set a regular pattern for handling the accounts month to month. This could be once a month or weekly (better for cash flow management). And, as any accountant or bookkeeper will tell you: “Don’t mix your personal expenses with business expenses on a business credit card.”
Keep books up to day
While monthly accounting is okay in theory, weekly bookkeeping has its merits. Even a modest sized contracting business could have several dozen transactions to account for each week when you take into account vendors, sub contractors, hosting accounts, credit card charges, PayPal and other service platform like Elance and O-Desk.
Accounting is ‘the language of business’
It is easy to seek bookkeeping as a necessary ‘evil” and all about compliance- gst and tax obligations – but it is a fact that business difficulties such as cash flow crises, lack of profitability can arise from a poor understanding of costs structures and margins. Doing the books improves cash flow because you collect quicker on invoices and recognise that cash flow projections will allow you to plan for managing the business cycle of your business. You don’t have to do the books yourself if you don’t meet the essential trade off: time is scarce so is your time worth more working ON the business than paying a bookkeeper to do your books each and every week in a professional and error-free way.
Don’t discount: identify expenses
Some costs can be better managed. The best way to identify these costs is to see them in relation to your overall monthly expenses. Bookkeeping and a monthly report from your bookkeeper contractor or service allows you to see expenses that may need addressing.
Your finance toolkit
You may know your ‘stuff’ but having intimate knowledge of revenue and cost patterns are a requirement of good business management. What information do you need to be a good manager? You may have two or three key indicators (like revenue or new customers) but other information may be equally vital to be a successful business owner/manage – especially if you need to make a finance proposal:
a. Income Tax Returns (last three years)
b. BAS Returns (last three years)
c. Financial Statements (last three years)
e. Business description
f. Cash flow projections
Cloud accounting software will provide a better bookkeeping solution than desktop accounting software but always keep the value of your own time front of mind before embarking on a DIY bookkeeping approach.
Morris Kaplan, is a business journalist, business owner and Publisher Director of the BookkeepersHub.