Well-established businesses usually have a full-time employee whose sole task is book keeping. When this is not the case, the vital work of accounting becomes drudgery. The owner typically operates a start-up business, and, due to budget constraints, plays many roles. In some cases, the chore remains unfinished until tax time; then, it is a nightmare.
The Cost of Being New
The fact that the business is new puts it at a disadvantage in the daily struggle to find customers. A new business does not yet have the advantage of hindsight. First, the business must learn, through experience, how to operate efficiently. Just as a toddler learns at a much faster rate than an adult does, a new business has a lot more "aha" moments than does an experienced one. Combining a lack of experience with a shoestring budget means entrepreneurs do secretarial work, make bids, clean, provide the service that defines the business, and finally, keep track of expenses and income.
Daily Priorities Affected by Stress
Entrepreneurs work hard to keep the business afloat. In some cases, business owners may even work at a separate job. This allows the business to put all capital back into the operation, while the job saves the entrepreneur from starvation. The number one priority is getting customers to walk through the door. Proper book keeping is not an annual event; however, it is often put off by stressed out business people. Between working the extra job, helping customers, and keeping track of leads, the books stay low on the priority list.
Disadvantages of Procrastination
Tax time comes every year. If the company relies on bank financing, the lender will want a copy of the tax return. This one, suddenly urgent, necessity can effectively cripple a startup business; forced to work day and night trying to find, and organize piles of receipts means there is no time to solicit new business. Customers do not get the attention they deserve; the business suffers. Additionally, a disorganized financial control system means missed deductions and credits.
The Solution is a Daily Routine
Entrepreneurs should have a plan in place before the business opens. Every receipt is proof of a transaction; there should be a dedicated holding area for receipts. Each day entrepreneurs must record income and expenses. If the business is mostly mobile, taking service to customers, there has to be a place to store receipts in the vehicle. Successful operations file and record these items at the same time every day.
Getting Organized
The business and personal accounts are separate. Most banks offer online banking; using one account for expenses creates an automatic record. Careful planning for computer and software needs contributes to a smooth-running operation. There is software available for everything from managing the books, to preparing a tax return. Certain financial tools are compatible with tax preparation programs; at tax time, businesses simply perform an "import" function, fill in some data, and the job is done.
Planning, and working the plan makes life much easier. Leaving a year's worth of work until the end is an expensive, stressful way to work. Well-organized businesses notice patterns in expenses and income; these trends shed light on the causes of unnecessary expenses. Decide to organize now; your business does not need any roadblocks to success.
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Michelle Reynolds has helped hundreds of business owners understand how to improve their company finances - from her 20 years working as a corporate Finance Director to years mentoring start up businesses she uses this experience to guide business owners through their accounting process. http://www.thefinancementor.com is a range of online book keeping courses which take you step by step through the process - it's easy when you know how.
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