Most small company owners just hate the thought of having to keep books. But as a company owner that’s one of your primary jobs. The issue is actually three parts to it. There’s establishing the books, there’s the info entry and filing that goes with it and then finally there’s the analysis of what those numbers mean. Now I tell people that establishing books is similar to learning word, Microsoft word, and English at exactly the same time. It is rather difficult. Because you’ve got to master a bookkeeping system plus you’ve got to master a computer software system at exactly the same time. So that it becomes difficult and it becomes frustrating. But as I said, this is a job that’s yours as the business owner. So once you’ve setup an information of accounts, that’s the accounts where you understand your income is going to go, where your expenses, your car or truck expenses, your advertising expenses, but it is also the total amount sheet accounts, your bank accounts, your credit cards and loans you have outstanding, and your equity accounts, which are really ownership accounts.
We’ll talk more about that later. Those accounts must be set around reflect the method that you actually do business. This is the key. And even though most of you do not want any kind with this, I implore you as a company owner, you’ve got to accomplish it in order to set it up how you want it. So once you’ve got the accounts setup the way in which that produces sense to you, so you can consider the accounts and say I understand what’s within, I know very well what kinds of transactions, or receipts or dollars have been in that account. Just intuitively, I understand what’s within, and then the next phase is how to accomplish the info entry and to keep up with the daily filing, processing receipts and all of that type of stuff. Well again, most business owners the very first person they want to hire is really a bookkeeper and do all of that so they don’t have to. We suggest strongly that you’ll require achieving that and soon you are determined precisely how you need most transactions processed. Where you need them filed. For instance, you’ve got a land line phone and you’ve got a mobile phone, do they both get into exactly the same expense category telephone or do they’re going into different places.
You could have postage expenses. Do they’re going under administrative postage or do they’re going under administrative and marketing or perhaps freight. You’ve got to produce these kinds of decisions. What we suggest is that you keep a small notebook next to where you do your bookkeeping and every time you stumbled upon a new transaction, write down in the notebook precisely how you are interested booked. When you obtain a phone bill, we’re going to book that to this account. If you receive a freight bill, we’re going to book it to this account. So precisely how do you want it done? Once you’ve got eighty, ninety percent of the transactions done, and some are tricky. Such things as how have you been going to accomplish refunds, how have you been going to accomplish prepaid deposits, some get tricky. Once you’ve got those determined then you can certainly delegate that part to a clerk or some kind of a data entry person. Then the third step is actually the owner’s job. And it’s periodically reviewing the books and doing quality control.
And saying what are these numbers wanting to tell me. My sales went up, my expenses went down. Why did sales rise, why did expenses go down? Is there a blunder some place? What do the numbers want to let you know about what’s happening to your business. Now as a small company owner, you intuitively know what’s going on. Nevertheless the books become the validation of what you think. Plenty of business owners walk out business because what they believe isn’t true. So keep a good pair of books to ensure that your assumptions actually reflect the facts.