Last time, we focused on six good habits every small business owner should adopt for the good of their company. In the next few posts, we’ll dig deeper into each of those habits, one by one, to paint a clearer picture on how incorporating these practices can help boost your financial management.
There’s one number most businesses have a firm grip on: their checking account balance. In truth, the size of this number is how many gauge the health of their operation. If it’s big, they’re happy; if it’s small, they get nervous. There are two main issues with this notion. One, the number by itself is meaningless. You must bring in other figures (bills, invoices, credit statements, receivables and the like) to paint the clear picture necessary to run your business. Two, bank reconciliation often becomes the first task to fall by the wayside when business gets busy, when it should be the last. Skipping one month of reconciliation is dangerous because it leads to skipping to two, then three, and leading to a daunting tangle of numbers requiring time to sort out—and that’s wasting time you need to grow your business. What if you have erroneous, duplicate or missing transactions in your financial management software? What if you sent an electronic payment that didn’t go through? You can’t know, unless you regularly reconcile your accounts with your records.
Making the vital vow to yourself to reconcile accounts every time is an important step. Another is communicating consistently with whomever handles your money. While you might know what financial resources you need day to day, your accountant (or other responsible staffer) offers a keener, more detailed perspective on your accounts so you can plan ahead and make more empowered financial decisions.
Once you have the people in place, get the proper tools. Accounting software like QuickBooks is helpful for small- to mid-size businesses because it facilitates and simplifies financial management, allowing managers to centralize their money data. This software saves time by automating many tasks, putting crucial data at your fingertips, enabling quick generating of profit-and-loss statements or other helpful reports, and streamlining AP and AR. If you decide to enlist the help of a manager or bookkeeper, make sure to meet at least once a month with this person, to improve your understanding of the state of your business. Take into account that we all have different emotions/thoughts/feelings about money. An important benefit of consulting with someone who has an unbiased relationship with your money can help you make smart decisions that are based on actual income, expenses and liabilities—not how you’re feeling at any given moment.
It’s easy in this digital age to assume banking has advanced far enough to make errors obsolete. In fact, technology just makes it easier to spot errors we likely missed in the past. Diligent reconciliation of your accounts enables you to avoid all-too-common errors (money deposited into the wrong account, accidental double payments) before they become costly and hard-to-correct problems, such as bounced checks.
Reconciling your statements isn’t just good for the here and now of your operation. Current, accurate financial statements make it possible for you to borrow money, drum up additional capital, and make other decisions necessary to grow your business. Contact me at Daliah@MySmallBusinessPro.com and I can help you get the ball rolling.