In boom times it’s very easy for business owners to ignore the quality of their financial reporting system and turn a blind eye to financial management issues. Unfortunately when these bad habits spill over in to difficult economic times it can have catastrophic consequences.
The most basic requirement for a successful small business is good accounting records. Up to date, accurate financial records lets you make informed business decisions. They provide vital management information needed to grow your business and monitor key performance indicators.
Despite the introduction of GST some 8 years ago, the majority of small business owners are still using accounting software beyond their business needs and level of accounting skill. The net result is they generally produce ‘computerised shoebox’ records that should not be relied upon when making financial or strategic business decisions.
If you don’t understand double entry accounting principles including debits and credits, it is time to review your accounting software. As a rule of thumb, you should have financials available within 14 days of the end of each month. This is supported by an Australian survey that suggests that a business’ very survival depends largely on timely and accurate records.
You also need good accounting records to demonstrate your financial position to banks, other lenders and prospective buyers at some time in the future. These parties will want to track your historical performance and will demand current data. The Tax Office also requires you to keep and maintain business records including source documents for at least 5 years. In general you need to keep records of all transactions including accounts receivable, accounts payable payroll, petty cash and inventory. A word of warning, don’t get bogged in data and superfluous reports that are meaningless.
Well managed businesses produce a ‘weekly snapshot report’ of:
Remember, people go into business to maximise a particular skill or concept, such as building, plumbing, consulting, wholesale or retailing. Record keeping and business management are often not the primary skills of the business owner. In fact ‘numbers’ are not everyone’s strong point… as Ma & Pa Kettle demonstrate in this video clip….
An interesting clip……phew….glad it’s not you huh!!
NEWSFLASH…..
Did you know bookkeeping software exists in the market place which is:
- Extremely cheap
- Does NOT require you to enter transactions AT ALL
- BAS information is automatically available at the click of a button
- You can run simplified Profit Reports anytime you like!!
Well…………if this appeals to you please contact our office to speak with an accountant.
Don’t let financial record keeping compromise your business. The solution exists, so ‘raise your hand as help is a call away’.
