As a business owner, you may have found that managing your accounting system can be tricky at times, especially if you have no formal training in financial management.
Do you get slightly intimidated when your accountant starts throwing around words like breakeven point, return on investment, or even balance sheet?
Fortunately (or unfortunately), you are not alone in this. Many small and start-up businesses fall prey to poor accounting systems, ignorance of financial policy and other external factors. They eventually close down or suffer the consequences of a poorly managed financial system.
Fortunately, good accounting structures do not need to be complicated, especially at the start up stage. Maintaining them can also be simple and affordable. Putting them in place, however, may be the difference between frustration and business success.
Consider the following pointers to increase your company’s chances of survival and growth.
Employing a full time professional accountant may prove to be expensive especially at the beginning. And yet, their professional expertise is what you need in order to lay down professional standards. One way around this is to hire them part time and instead employ an accounts assistant. The professional accountant can work with the assistant, advising them and looking over their shoulders to ensure that high standards are maintained.
Your accountant may know of someone with the required skills or should be able to carry out interviews when you have identified a potential candidate within your own networks. Students in university accounting programmes or retired accountants can be an option too.
Another way to save money while working with appropriate resources is to take advantage of free accounting software. The choice of software should be done on the advice of your accountant because you may need to transfer the information you capture to more advanced software in the future.
Introduce systems and procedures of accounts in your business as early as possible.
After you have been in business a few months, you may notice that your business documents (Receipts, invoices, payment vouchers) are starting to pile up. Finding files containing important financial information or confirming dates of business transactions can become a problem.
Businesses should take the opportunity to create and begin with the right systems. They have the time to explore several structures before settling down on the right one, without causing significant loss to the enterprise, unlike bigger and older establishments.
Educate yourself before you engage a professional. This will ensure that you will understand recommendations given to you by your accountant, and perhaps suggest variations as well. Free information and resources available online will give you a simple start and teach you the basics of financial management.
As your business grows, allow yourself the flexibility that the expansion requires. Avoid the temptation to insist on ‘what has been working’.
More staff will be hired, systems may have to be upgraded and new technology purchased. Provide for these changes through budgeting and planning strategically for future periods.
Consider taking your accountants through workshops, and other training events to prepare them for bigger responsibilities ahead and to encourage them to keep updated on industry trends.
Increased profits should not lure you into a spending spree. Keep your expenditure within the planned budget.
Your accounting system provides the information that you need to know the health of your business. It guides your decision making on future projects and operations. Simple structures that support this system should be thought through and put in place as early as possible.