Small Business Bookkeeping

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Keeping good books that track your business performance is critical to your success. It’s very easy in a startup business to lose sight of the money you are spending in proportion to your sales revenues. Also, it’s easy to let your accounts receivable drag on without constant monitoring and collection efforts.

Good small business bookkeeping allows you to ensure that you are earning a profit and ultimately making money. I cannot under emphasize the need for good information of this type. Finally, you should have an analytical spreadsheet that you use to constantly track your profitability and analyze performance.

Small Business Bookkeeping with Quickbooks I’m a huge fan of Quickbooks and very specifically--the online version. The online version is essentially the same software as the regular offline version. But, because it is online, it offers value for the small business person that is normally only available to a big company:

Since it’s online, you have access when you are at work or at home or anywhere that you may want to make an update or look at financial data. For the small business startup this is flexibility that you will certainly need.
It is constantly backed up by Quickbooks so you will not lose your vital data in a system crash. Hard drive crashes always happen at the worst time. If you lose your accounting data your important financing, tax, and business development projects will be put on hold.
You can easily and securely share safe access to Quickbooks with your hired professionals such as an account during tax season. I used to have a book keeping firm that would enter my data for me and I could quickly access financial information right after they finished.
You don’t have to worry about system compatibility, upgrade, operating system and other configuration issues. This is a major reason why the whole category of online software is taking off across the board(e.g. ASP and Saas.)

Doing the Bookkeeping

If you do not want to do the book keeping yourself, I’m right there with you. Bookkeeping is a tedious and time consuming effort that can be well handled by relatively inexpensive firms.

There are a number of firms that focus exclusively on book keeping and can provide you with favorable rates to enter your financial information into software. If you are using Quickbooks online this can be a very efficient process because as soon as they enter the data you will have access to all the performance information.

In my last company, when I was in startup mode and wanted to focus my energies, I hired an excellent firm that did the bookkeeping but with a twist. This small business bookkeeping company would have me scan my documents in (credit card statements, bank statements, bills, receipts, etc.) and send them to the company via the Internet. Then, they would take the documents and have the data entered directly into Quickbooks and I would have all the information available to me quickly and easily. It was a major time saver.

The firm providing small business Bookkeeping can also help you setup your “chart of accounts”. This is basically a list of the accounts that you will use to collect financial information. It includes simple accounts like "Rent" and less obvious accounts such as "interest expense." Setting up your chart of account is pretty simple but people with experience can make suggestions for which you might not have thought. And, if you don’t setup your chart of accounts right to begin with it makes it more difficult later.

Tracking Financial Performance I have always been a big stickler for tracking my financial performance very closely and not letting myself forget about my expense and revenue situation for a moment. In order to facilitate this, I entered both a detailed forecast of expenses and a forecast of revenue. This way I could have a clear view of how I tracked between the two on an ongoing basis.

As I added new potential clients with upcoming revenue I would add that revenue into the forecast and see how it affected my bottom line profit. Also, if I had to incur some new expenses that I had not already put tino the forecast, I would add those in and immediately see the affect on profit.

This is a very powerful motivator when it comes to both being careful with how you spend money and also to remind you that you better get out and sell.

To facilitate this tracking you should setup a spreadsheet with a number of tabs. The first tab contains a snapshot of your most recent financial data compiled into an income statement. The second tab contains your financial forecast, organized in the exact same way and with the same accounts as your snapshot of the most recent financial data.

The third tab would contain the “most accurate data.” This is determined in the spreadsheet by a formula. It comes from either the snapshot data if it exists for the month in question or from the forecast if no data is yet present for that month in the snapshot.

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