In any startup or growing company, you are extremely busy. With everything that is going on, it is easy to lose sight of how and where you are spending money. Here we will give you some tips on some simple bookkeeping techniques that will make you the master of your financial domain and help you manage your money.
Bookkeeping, simply by definition, is the recording of a company’s financial transactions. This includes sales, purchases, income, and payments. Here are some tips that will help you get bookkeeping right the first time.
1) Handle paper once
Buy yourself an expanding plastic folder, the concertina type, and keep it within arm’s reach. Label each of the tabs to cover all types of paperwork. These can include supplier quotes, supplier invoices, client quotes, client invoices, expenses, government documents, bank statements, credit card statements, etc.
Each week open your mail, or email, print any emailed PDFs and file paperwork under the correct tab. Prevent paper accumulating on your desk and crowding your productivity. Handle every piece of paper once and you’ll make life easier when you do your books at the end of the month.
2) Report monthly profit and loss
For a service-based business, MS Excel will suffice. Setup MS Excel using two sheets. One tab for expense items (out), and the other for income (in). By setting up these two sheets you can quickly calculate monthly profit and loss.
At the very least record income so you can keep track of accounts receivable. Keep track of all jobs done and as you get paid, check them off on your bank statement. Note any missing sums or discrepancies and track them down more easily.
The more detailed your Excel spreadsheets, the more data you capture when you import your files into a professional accounting application.
3) Money makes relationships
Set a recurring day in your calendar to do the books each month. Put everything else aside and focus on this one task. By doing so, you can ensure you maintain good relations with stakeholders by paying them on time. Make a name for yourself in your industry as being a good paymaster, and reap the benefits of that reputation.
By being disciplined about the pay day, you condition suppliers to your billing cycle and reduce the number of nuisance inquiries on outstanding payments. If you are drafting contracts, include a clause on the billing cycle.
4) Summon a finance advisor
Create a fictitious finance advisor. They are going to be your exchequer when it comes to all matters of money. They are a great asset to the team, especially when the money you are spending is not yours.
Each time you reach for the cheque book or the credit card, your finance advisor will appear and interrogate your decision to purchase. Look after the pennies, and the dollars will take care of themselves.
Your new friend will help during negotiation. Ask them to budget for salary, suppliers and cash expenses. When lured into situations where you may be tempted to overspend, explain to the other party that ‘finance’ has set a budget. Refusing to spend beyond a limit gives you leverage when negotiating salaries and supplier quotations.
Look forward to our next blog where we will continue with part two, and give you even more tips to master your company’s finances.