Strong bookkeeping and financial accounting records are important for any business, big or small to be successful. Some of the largest businesses across the globe have ultimately failed because of the disorganized state of their Accounting records -- or worse, deceptive. Small businesses may be even more likely to be affected by poor accounting practices.
Even though small businesses are heavily reliant on cash flow, most entrepreneurs know very little about accounting. They believe accounting is better practiced by larger companies with more assets. They run their business as if they are running their personal finances, checking the bank account balance occasionally and paying bills when they have the funds.
Some small businesses even hire a bookkeeper "not an accountant" who knows very little about proper methods of accounting, and trust them completely with all the finances.
Here are four Accounting tasks you should be doing each and every week.
1. Bank Account Reconciliation
Your bank account can't be reconciled too often. A proper bank reconciliation means that you have the cash that you think you have, which is obviously very important for any business.
Many small businesses make the mistake of waiting for a bank statement from their bank to reconcile their accounts, but bank statements are only sent monthly. That means you have an estimate of 30 days between reconciliations, and a lot can happen in your business in 30 days. All of your cash accounts should at least be reconciled weekly. If you have enough time, daily reconciliation is an even better option.
2. Vendor Payments
The system for vendor payments is needed. This is necessary for keeping track of all your debts, and it's also important for creating a good reputation and credit history with your vendors.
Your terms of payment will vary from one vendor to the next, so you can't get by with paying bills only once a month. While some vendors may give you 30 days to pay, others require payment on receipt. The vendor will most likely freeze your account or cancel your service for nonpayment if you only pay bills on the first of the month and receive a "due on receipt" invoice on the second.
However, this task shouldn't happen daily either. It is very confusing and time-consuming for your bookkeeper, and there's no real benefit to paying bills daily. Paying bills once a week is the best time frame because it's most efficient. If your bills are promptly paid, your bookkeeper won't be distracted by too many check runs.
3. Customer Receipts
Unhappy customer is the only thing worse than an unhappy vendor. People will be sad to pay a bill, then receive a "past due" notice a week later. In other to avoid this situation, ensure that your customer receipts are recorded on time. Daily would be ideal time frame, but doing it weekly should be sufficient, too.
Whichever of the two time frame you choose, ensure you mark the actual date you received the payment -- not the current date or the postmark date. Obviously, don't mail statements without posting all your receipts first, unless you want to receive calls from frustrated customers.
4. Other Transaction Entries
Your transactions will be made up mainly of Vendor payments and customer receipts, but you probably have others, too. Auto-debits, interest payments and bank fees are some common transactions that you'll need to record weekly. In other to make the process as smooth as possible, most bookkeepers choose to record these, including supplier statement reconciliations, before a bank reconciliation.
As your business expand, you'll likely develop your own system for each aspect of your accounting, but this guide should give you a good start. Remember: It's important that you stay on top of the business finances whether you're the business owner or the bookkeeper.