I have been there and completely understand where you are coming from. You are all excited about your idea, investing your time and money on networking events, dinners with potential business partners or clients, personal development seminars, and getting your message across passionately.
Then it is time to keep a proper record of all the expenses you have been incurring on your business. Guess what? Most of you are probably putting all the receipts on a shoe box because you have no idea how to organize your record keeping system. Or you just do not care because you are not fan of paperwork.
A good business idea can easily turn to ruin without proper financial management. Luckily, it’s not that hard to start a Bookkeeping System if you read this article and follow the 9 steps I describe below.
- Buy a few folders, labels, file frames, a pen and a plastic box or paper box, etc.
- Label your folders according to the expenses you have on your business. For instance, advertising, meals and entertainment, office expenses, supplies, legal / accounting, rent, maintenance and repairs, telephone, utilities, travel expenses, fuel and oil, parking, car maintenance and repairs, HST account, Payroll account, WSIB account, Corporation account, etc.
- If you are away on a business trip, carry an envelope labeled travel expenses and put all your receipts in there. Examples of allowable expenses are public transportation fares; hotel accommodations; and meals. Make sure you put the name of the city and the purpose of the trip.
- When you come to your office, you just put each receipt on the proper folder. It may take 5 to 10 minutes a day depending on the volume of paperwork.
- If you already have credit with your vendor, you can add a tray on your desk for all invoices that need to be paid. Every Friday you pay your bills and put them on the proper folder.
- If you sell your products or services on credit to your clients, make sure you have a tray on your desk for all invoices outstanding. When a cheque arrives, you apply to the correct invoice and file it properly.
- Every first of the month you either update your books or send it to your Bookkeeper.
- If you have credit with your vendors, you may want to update your books once a week so you will pay your bills on time avoiding incurring unnecessary extra costs such as late fees.
- Follow the same procedure with your personal paperwork. I find many small business owners mix a lot of their personal matters with business paperwork. It costs more when you send your shoe box to a Bookkeeper or Accountant. It costs more for missing bills due date.
Have a file system in place and make your life much easier to run.
“Reduce risks, pay on time, be efficient and save money and time” Renata Magalhaes