I have been working on a presentation, and it has made me think about the problems I have discovered too many small businesses and non-profits have in their day-to-day operations. Of course, I am looking at this from the standpoint of accounting. There are some rhetorical questions to be asked, and hopefully, they will help you decide if there is a problem with your own bookkeeping.
So here are three signs that you probably have a problem,
- You are running your business based on your bank balance. The amount of money in your bank account is an important number, but it is not an accurate number to be using to base financial decisions. Consider the following scenario: You deposit $10,000 in your checking account. The bank balance shows $10,000. But you could have activities that the bank does not know about, such as checks you have issued. Until the checks are presented for payment, the bank has no idea they even exist. The true balance on the checking account might be $5,000, rather than $10,000.
- You are not using your financial reports to make business decisions. At all times, you should have immediate, up-to-date reporting on your business or non-profit financial status. You should not be guessing about the status of your business, but rather you should know precisely where your finances stand.
- Your books are not current. Invoices you have issued are not paid, bills you owe are uncertain, and you can’t find receipts or other important papers. In other words, your bookkeeping is a mess.
So let’s get blunt:
What is the state of your bookkeeping?
Who’s bank balance is up-to-date (and you trust) – yours or the banks?
When was the last time your bank statements and business credit card accounts were reconciled?
Are you ready for an audit by any government agency at any time?
Are you ready to file next year’s taxes without any stress?
When was the last time you looked at, and analyzed your business’s Profit and Loss statement?
If you need an emergency bank loan, would your books be suitable for a commercial loan officer to approve the loan?
If you have a bookkeeping problem, how long will it be until your business is in danger?
I said there would be a lot of rhetorical questions. If your records are not in order, the best thing to do is start getting the books taken care of. Only you can take the steps to run your business efficiently.
And so, you have just read a part of my presentation to help business owners and non-profits to get organized.
