Financial Systems

Small Business is about many things – sales, marketing, customer service, employees, but invariably it all comes down to finance. You can make it, sell it, and ship it, but if you don’t collect the payment, manage your cash well and document all your transactions such that you don’t run afoul of the tax man, then you won’t be successful in business (in point of fact, you won’t be in business very long). Good financial systems are important, but they are often undervalued in a small business.

The irony is that it is not difficult to set up good financial systems. It starts with a good accounting program, of which there are many to choose from. Quickbooks, for example, will work fine for many small businesses. Then, it’s important to set up a workable system. You want to make sure every business transaction gets entered into your accounting system. This includes all sales invoices, all deposits and all expenses by cash, check or credit card. All cash, checking and credit card accounts need to be reconciled monthly. This is crucial. If you don’t timely reconcile your cash, checking and credit card accounts then you don’t really know what could be transpiring with your finances.

If possible, the person reconciling your accounts should be different from the person entering the data. And the person signing the checks should not be responsible for reconciling or entering data. You may have heard of the term “Internal Controls.” This division of tasks is a form of Internal Control – a system of checks and balances that assures accuracy and make it difficult for someone to embezzle. Hiring people you can trust is important, but so is setting up a system that will keep everyone honest.

Reviewing your financials monthly is another type of Internal Control that is easy to do and helps connect your financials to your business planning. As a business owner, you need to know how to read and understand a profit and loss statement and a balance sheet. You don’t need to be an accountant, but you do need to know enough to understand what is going on in your business. Finance does go hand in hand with running a business, and as an owner you will always play a crucial role in your business’s financial system.

Post a Comment

You must be logged in to post a comment.