Small Business Bookkeeping Advice
If You Don't Know What You’re Doing, Find Someone Who Does!

By Darin Webb, founder of The Bookkeeping Company

Many small businesses will experience losses or, worse yet, close up shop, because they are not paying attention to their bookkeeping. Unfortunately, many entrepreneurs don't possess the accounting know-how to keep their businesses operating smoothly. And that’s costing them time and money.

Here are three common “fatal financial errors” I've seen in small businesses:

1. Entrepreneurs handling the bookkeeping themselves. Bookkeeping is much more complicated than writing checks and making deposits. Business owners can easily fall behind in bookkeeping duties, perhaps not realizing that they have months of unrecorded data or that their checking accounts haven't been reconciled—resulting in bounced checks that can affect their credit rating.

2. Haphazard preparation for tax time. Because business owners must concentrate on growing their businesses, meeting deadlines and keeping clients happy, when tax time arrives, they may find that they don't have the necessary paperwork they need to properly file their taxes. An accountant can only do so much—ongoing and accurate recordkeeping is key to fully taking advantage of business tax laws.

3. Business owners who believe the only solution is a full-time bookkeeper. Because sales are strong, they think someone has to sit at a desk all day long overseeing the books. For most small businesses, this is not the case. Even a five-million dollar company may not need a full-time bookkeeper. It has nothing to do with the sales, but everything to do with the amount of activity the business generates—i.e., invoicing, bill paying, payroll, etc. Hiring a qualified part-time bookkeeper will provide tremendous benefits to the business without incurring the high cost of full-time benefits.

Small business owners need to examine their current financial reporting systems and evaluate their own recordkeeping expertise. They may find that concentrating on growing the business and outsourcing the bookkeeping function may be an effective way to improve the bottom line.

You can learn more about the financial side of business by attending these AMA seminars:

• Fundamentals of Finance and Accounting for Nonfinancial Managers
• Intermediate Finance and Accounting for Nonfinancial Managers

Author Bio: Darin Webb is founder of The Bookkeeping Company, a firm that offers a network of quality bookkeepers to small businesses in New York City. Contact him at 212-242-6010 or via e-mail at darin@thebookkeepingco.com.