Operating your own business is a huge task, and it’s easy to let the day-to-day operations keep you from paying attention to record-keeping responsibilities. But the truth is that having a system in place and then being disciplined about its upkeep can make a significant difference in your ability to manage your organization. Here are a few reasons why that’s true:
So, what are the best steps you need to take to put your business on the right track and your record-keeping in order?
Far too many entrepreneurs focus all of their attention on their product or service and then fly by the seat of their pants in terms of keeping records of their revenue and expenses. That leaves them frantic and frazzled when it comes time to answer questions for investors as well as to file taxes. Having a record-keeping system does not require a huge investment of either time or money. It can be as simple as creating a spreadsheet on the software that’s built into your laptop or as complicated as hiring an accounting firm to keep your records for you. Whatever you choose, consistency is the key. The sooner you get set up and the more you stick with it, the more easily your new system will become a habit.
Establish a business budget and stick with it
If you really want to know whether your business is operating efficiently and making as much money as it can, start by creating a budget for expenses and then see whether you can stick to it. By working with a number in mind you’ll quickly be able to see whether you are overspending and if so, on what. Then you can make corrections that will help you boost your profitability.
Having a disaster plan in place for your business doesn’t mean you’re a pessimist – it means you’re smart. All anybody has to do is watch the news to know that trouble can strike in countless ways, so have a plan in place that addresses each of the following elements:
If your collection process is haphazard then your ability to collect what you’re owed is in jeopardy. By having a rigorous collection process setup that tracks who is paying and how long debt has accrued you’ll be better able to assess your situation and learn which clients need to be cut off or handed off to another agency. A system that reports your aging accounts receivable will make clear the two oldest adages regarding money owed by clients: that some people simply aren’t going to pay, and that the longer a bill is outstanding, the lower your chances of collecting on it become.
More than any other element of your business record-keeping, your employee records and payroll taxes are the thing that is most likely to put you at risk for an audit by either your state agencies or the IRS. That’s why it’s so important that you have a robust payroll system in place that tracks all of your employees, their payroll records and the payroll taxes you’ve paid. The better your system and the more you stick to it, the less trouble you’ll be in regarding your withholding, payment or reporting responsibilities.
Whether you’re a sole proprietor, a partnership or LLC, or a corporation, you have an assortment of documents and business records that you need to be able to access quickly. To ensure that you are able to do so at a moment’s notice, take advantage of one of the many cloud-based document storage options available. This can be as simple as accessing the storage available through a free email account or by paying for more sophisticated cloud storage. Choose the option most suitable for your business, but make sure that the strategy you select is professional and reliable.
A great way to get your business back on track and keep it in good standing is to work with an accountant or virtual CFO.
About Sonu Shukla, CPA, CFP
Sonu Shukla is a Certified Public Accountant as well as Certified Financial Planner. He believes in proactive tax planning and has the skills, education and experience to demonstrate passionately planned financial strategies. His firm tailors highly efficient tax plans for his small business clients, all in a one on one environment where he and the client can bounce ideas around until every detail is worked out. Located in Orlando, FL, he services all of Florida.
