As an entrepreneur, you have a lot on your plate. You're responsible for the vision and direction of your business, and you also wear many other hats - marketer, salesperson, customer service representative, and more. So it's no surprise that accounting and bookkeeping might not be at the top of your priority list.
But neglecting these aspects of your business can lead to big trouble down the road. Learn how to set up an accounting structure for your business with these helpful tips. Having a sound financial foundation is crucial to the success of any enterprise. Use these steps to get started today and you'll be on your way to ensuring the success of your business.
No business is too small to have an accounting structure. It is simply the set of rules that you will follow and actions that you will take to ensure that your accounting for your business is correct and maintained properly.
So here are 7 tips that you can follow to implement an accounting structure for your business.
1. Have an accounting solution
There are many solutions out there that are very user friendly, reasonably priced and with cloud based technology makes accessibility easy. Do your research on the accounting solutions that are available and learn how to make it work for your business.
And if you are thinking well excel is free, please discontinue your use of spreadsheets to record your financial activity. If you want to grow your business, you have to take it the next stage and use the appropriate business management tools. Additionally most solutions come with a basic free version so there's nothing to lose.
2. Have an record keeping process
After installing the accounting solution, you have to have a system or process to ensure that all transactions are logged in the application. What does that look like?
First things first ensuring that all sales are logged in the system. It may sound like an obvious tip but depending on how your business is set up it may not be as easy.
If you are a service provider like a digital marketer or consultant, your sales volume might be low. Just a few transactions per month based on the number of clients. So you raise your invoice and send to client and that’s it. And if you have a retainer type arrangement, set to recurring and that's it.
If you are retail however with higher volumes seeing multiple customers per day it may not be possible to raise an invoice for every single customer. So in this case your record keeping system may look like a Point of Sale system or even an e-commerce platform if you run the retail business online.
Expenses need to be reported in the solution as well. Understand what are the sources of your expenses and ensure that they make their way to the solution. Simple actions like creating a folder on Google drive where copies of the bills are saved or even a physical folder in your office. Get in the habit of tracking your expenses, keeping the documents and then enter into the accounting solution.
3. Review your bank statement regularly
Reviewing your bank statement not only tells you how much money you have but it shows you where it came from and where it went. All these are business transactions that need to be recorded. So a good exercise is to review the statement and see if the underlying transaction has been recorded in the system.
If you have online banking this will make it even easier since you don’t have to wait for the statement. Pull the transaction report weekly and set aside a schedule time to go through it.
4. Have standard credit terms and effective collection process
This one is especially for the service providers who give clients time to pay for the service. Make sure that your terms are clearly established and communicated to the customer either via the contract and/ or on the invoice itself.
Once this is set up, make sure your system allows for effective follow up to ensure that they pay within the credit terms set. For eg if you give them 10 days to pay, your follow up process should start from day 5 onwards. Don’t wait until the term has expired to follow up.
5. Be aware of statutory obligations
Your system should include a flag of key dates for compliance. Dates like tax filing dates or annual returns or tax payments dates should be noted and monitored. Simple reminders on apps or calendars can help to ensure they are not missed.
The reason you want to do this is to avoid penalties and fines which can hamper your profitability. It’s shame to be fined for simply doing an action too late. That is completely avoidable.
6. Pay yourself a consistent salary
It gives stability to the expenses and creates a disciplined approach for you to be compensated by your business. This can also benefit you if your financial records are going to 3rd party say the bank for a loan. It looks much better to show consistent compensation rather than adhoc and varying amounts.
7. Hire an accountant
Hire an accountant. All the tips I shared above are great to get you started and help you manage but up to a point.
Accounting is not a do it yourself option. Finances should be handled by a trained professional. By all means educate yourself but ensure that you have a level of oversight by an accounting professional to help take you over the line ensure best practices at your business.
Setting up your accounting structure gives your business a level of governance and depth to its operations. It should be designed to ensure that money is spent wisely and the business upholds general good business practices.
Are you ready to set up your accounting structure?📈
Book a free discovery call ➡️ HERE to get started.