There are only a couple words I know which can clear a room faster than free food next door – accounting & finance. This contempt is understandable. Improperly managing your business finances may be the death sentence of your business venture. A recent New York Times article, “Top Ten Reasons Small Businesses Fail”, listed improperly managing finances or poor accounting decisions as components in nearly 70% of the top ten reasons businesses fail. Yikes.
Obviously, avoidance isn’t the answer. It is important to carve out time in your busy schedule to understand basic accounting practices and set-up administrative practices to track all your finances. Here are a few tips to help you implement a solid accounting plan for your business:
1. Get Accounting & Finance Software
You don’t want to be record keeping on a wish and a prayer. It is possible to boot strap things by using spreadsheets, but this approach is all manual and very time consuming. One of the best things you can do for your business -- one customer to 100 customers -- is to test out and implement simple accounting software.
Quickbooks is one of the most popular, but there are many free or affordable options for small business owners. Check out these 5 free or affordable online accounting solutions. If you aren’t sure which accounting software will suite your business needs, here is a great article about selecting accounting software from About.com's Financial Software Guide.
2. Get Educated
Take some time for an accounting/finance 101 session. If you are are planning to master the numbers game in your business, you will also need to master the lingo. Here are a few of the terms you should understand:
- Balance Sheet
- Break Even Analysis
- Break Even Point
- Cash Flow Statement
- Income Statement
- Return on Investment (ROI)
- Cash vs. Accrual Accounting
Spend some time in your local library or bookstore. There are shelves of simple guides for small business accounting and finance. Another resource to leverage is a friend or contact who is an accountant. Take your questions to them and ask them for their advice or some best practice recommendations. Weigh the information they offer against your own thoughts and experience (you know your business better than anyone).
Another option is to enroll in continuing education courses held in your city or at your local community college or university.
3. Get Help
Based off how much business you are doing or where your expertise lies, you may decide to hire a bookkeeper or an accountant. What is the difference? A bookkeeper manages the day-to-day stuff, while an accountant makes strategic decisions on how to get you from point A to point B in your business.
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