Shortly after we had started our consulting firm, Whitestone Partners, we began an engagement with a home healthcare business. As we do in almost all of our engagements, we asked to see the company's financials.
In response, the owner reached behind her and grabbed a three-ring binder, from which she extracted three pages, neatly stapled in the top left corner. Immediately, we could see that she had never even looked at those financials, because the paper by the staple contained no crease -- which would have been the case had anyone looked at the second page. That was unfortunate, because when people start businesses, they don’t always think about the ancillary tasks that keep those businesses going. For instance, few like to think about accounting. However, if you're going to stay in business any length of time, you'll need to perform some accounting functions. Related: How to Hire an Accountant In our experience, accounting functions in businesses that start as a one- or two-person operation and grow to midsize tend to progress through several steps. Obviously, you don’t need a chief financial officer (CFO) on day one. But you will eventually need people to help you transition. We’ve outlined the three progressive steps below explaining how to know when it's time to do that. Part-time or external-service finance professionalWhen a business starts out, it usually can’t support a full-time finance person. Nevertheless, you need to keep accurate accounting records from day one. If you lack the skills, it is often best to utilize a part-time professional and/or an service. You’ll need to accomplish three distinct tasks: Setting up and overseeing your accounting system. Many new businesses use QuickBooks, but other accounting packages are available. You’ll need to get your company set up by establishing a chart of accounts and determining the format for financial reports. En route, you will run into issues you hadn’t thought about when the books were initially established. You’ll want to periodically review the setup to make needed adjustments. Bookkeeping. This is the day-to-day entry of transactions into your accounting system and preparation of checks and invoices. More modest skills than those of whoever set up your accounting system will work, here. You may even take this on yourself, or employ a part-time person or an external service. One tip is to avoid using cash and instead make sure you run all transactions through the checking account or a company credit card. This will give you a record of every transaction. Another tip is to make sure that you review any money that leaves the company (e.g., via checks, credit card charges, payroll, etc.). Read Entire Article: https://www.entrepreneur.com/article/282896 Comments are closed.
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September 2017
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