Are you one of the many small businesses that use a “shoe box” accounting system? Maybe it’s not a shoe box – perhaps it’s a file cabinet or that bottom desk drawer. Whatever the space may be, you use it to stack your receipts, invoices, and various other documents. This is keeping track of everything, right? Take a look at this article and you may change your mind. Let’s talk about accounting systems and why yours may need an upgrade.
What should a small business accounting system accomplish? What is your current system lacking? First, the system should collect various forms of data. As a small business owner, you are probably quite diligent about saving statements and receipts already. Your accounting system should also have a sorting process that organizes your information. Most often, the information will be organized in a database, which allows for the final component of a good accounting system – financial reports and analysis. Unfortunately, the inadequacy of many small business accounting systems makes it difficult to produce accurate reports and therefore, conduct analyses that are actually predictive and useful.
The risks of shoe box accounting don’t stop there. If you are unable to conduct reliable analyses because the financial reports are skewed or non-existent, it will be much more difficult to monitor how your expenses change over time. Your accounting process should allow you to easily compare monthly costs to avoid subtle expense increases. A proper system will also facilitate the tracking of accounts receivable and payable – this will help to avoid those overdue payments! Having a professional care for the organization of your financial statements will be of great value if you happen to get lucky and chosen for an audit. The auditing process will be much more tolerable if everything is in order and sorted so you don’t have to stress.
We are all tired of hearing how tough the economy is. Unfortunately, it’s true, and small businesses are struggling to keep their heads above water. Your business can achieve financial success and longevity by compiling data, having an organization process, and using this information to forecast, make changes, and make decisions. Accounting doesn’t have to be a vague and scary process. In fact, if you get your ducks in a row with all this financial stuff, you may find it to be the most valuable tool of your business. Behm Bookkeeping is here to provide your business with experienced, professional service and give you the tools for financial success. Give us a call today!