| Most business owners look at the accounting | | | | Your accounting system needs to be set up in |
| system of their business as a necessary evil that | | | | such a way that it does not require significant |
| doesn't contribute to the bottom line. Yet, it is | | | | maintenance. There are many easy to use and |
| essential for a successful entrepreneur to know | | | | simple business management systems that will |
| how to set up an efficient accounting system that | | | | allow you to hire someone with an understanding |
| makes financial information readily accessible and | | | | of simple and basic principles to maintain. |
| contributes to always having enough money for | | | | ,b>CRUCIAL TO UNDERSTAND YOUR |
| your small business in the bank. | | | | BUSINESS CYCLE |
| ACCURATE FINANCIAL INFORMATION IS | | | | A business cycle is the flow of transactions |
| CRUCIAL | | | | needed in your business to complete the sale and |
| The purpose of an effective accounting system is | | | | collect the proceeds. In setting up your accounting |
| to communicate useful specific information about | | | | system you will want to know the types of |
| your business, that helps it function more | | | | transactions that are needed.o Place orders for |
| effectively. You never want to be short on the | | | | raw materials or merchandiseo Pay merchandise |
| cash you need to fuel your company's growth, or | | | | suppliers (or anticipated pay of employees at |
| even run daily operations. You don't want be in a | | | | service companies).o Enter goods into finished |
| position to get a bank loan or use a small business | | | | goods inventory.o Create orders and sales |
| line of credit regular ongoing business expenses. | | | | invoiceso Collect payment for credit sales. |
| USE ACCOUNTING REPORTS TO UNDERSTAND | | | | KNOW THE AREAS OF RESPONSIBILITIES |
| CASH SHORTAGES | | | | NEEDED IN YOUR BUSINESS CYCLE |
| Even though you may have been generating good | | | | Figure out the responsibilities needed for your |
| monthly sales, you may be in a low cash position | | | | small business management system and who will |
| on your bank account and do not understand why | | | | perform them. Some of the responsibilities you |
| It is at that point you should use your accounting | | | | need to assign include:o Overall responsibility |
| system and the reports they can generate to | | | | & management for the accounting system |
| help you find the problem so you can fix it. | | | | (including monthly reporting)o Accounts |
| You can look at your accounts receivable | | | | receivableo Accounts payableo Order entryo Cost |
| accounting report to review the payment history | | | | accountingo Inventory controlo Payroll (even if |
| from your big customers. It may be the case | | | | you use an outside payroll service, someone must |
| that those customers are paying you two to | | | | be in control and responsible) |
| three weeks later than your greed upon payment | | | | In many cases the same person will do many of |
| terms and as a result, you are running short on | | | | these things. The person you assign to be in |
| the money you need. Your solution would be to | | | | overall charge of the system should be the one |
| aggressively call the payable departments of | | | | who is most familiar with accounting. Remember |
| those customers and make sure the bills are paid | | | | to carefully check references from their past |
| in the timely fashion you had agreed. | | | | jobs, by asking questions on exactly what were |
| If you don't notice an accounts receivable | | | | their accounting responsibilities. It is also a good |
| problem, you can check your most recent profit | | | | idea to ask practical questions about how they |
| and loss statement for help. The P&L will | | | | would handle an expected financial challenge you |
| give you an indication of what profit you are | | | | expect in your business. |
| making on your sales. A savvy entrepreneur will | | | | If you are just starting your company, you may |
| look at the P&L of each customer carefully, | | | | want to have your accountant review the financial |
| as sales alone do not make for financial rewards. | | | | background and strength of the person you |
| If you have had to absorb recent price increases | | | | choose to run the system. Since it is often the |
| in your product cost, and your sales department | | | | case that you will need a small business loan from |
| have not been passing on those price increases in | | | | a bank or other sources, make sure your |
| the price to your customers then your margins | | | | accountant reviews checks that your accounting |
| will suffer and the sales you get will not add | | | | employee can control and produce the necessary |
| money to your bank account. | | | | statements for a loan. In a start up company, |
| GET YOUR INFORMATION BUT AIM FOR | | | | you don't want to incur additional expenses, and |
| SIMPLICITY | | | | with the right system you can set up your |
| You want to get vital financial information but you | | | | accountant to oversee your internal accounting |
| don't' want to hire an accountant comptroller, nor | | | | system, and monitor and check the monthly |
| an expensive bookkeeper to run your system. | | | | reports to insure accuracy and efficiency. |