Six ways to keep your business finance in check

Keeping track of the finances in your small business is the key to its success, but where do you begin? Here are six steps to setting your bookkeeping up for your business.

STEP 1: Collect all your paperwork

Before you start your bookkeeping process you need to have all your paperwork together. Then you will need to divide the paperwork into the following categories:

1. Accounts payable is the money you owe to other people for business expenses.
2. Accounts receivable is money that is owed to you by your customers.
3. Petty Cash is the cash you have on hand to pay small day-to-day expense.

STEP 2: Create an accounts payable folder

In this folder you will put the following information:

1. bills
2. receipts
3. bank statements
4. credit card statements
5. proof of payments

STEP 3: Create an accounts receivable folder

In this folder you will put the following information:

1. Invoices
2. Proof of payment (credit card slips, internet bank transfers, cash receipts)

STEP 4: Setup an Excel document

There are different ways to keep records but we will look at how to create an Excel document for your business.

In this document you will setup two sheets:

1. Accounts payable
2. Accounts receivable

On the accounts payable sheet, you will need to label the following columns:

1. Date you received the invoice
2. Supplier’s name
3. Account number
4. Type of expense (e.g., office supplies, professional services, etc.)
5. Amount you owe

On the accounts receivable sheet, you will need the following columns:

1. Customer’s name
2. Invoice date
3. Invoice number
4. Amount owed
5. Due date
6. Amount past due
7. Date payment was received

STEP 5: Capture the information

Now you need to fill in the information for each sheet. Depending on how many sales and supplier invoices you receive per month will determine how often you need to do your bookkeeping.

It is advised to do your bookkeeping once a week if you have a few invoices. The key to keeping accurate records is to be consistent and habitual. Ensure that you schedule time in your week or day to do your bookkeeping.

STEP 6: Create an invoice template

There are many examples of invoices for Excel but you must ensure the following information is on your invoice to get quick and accurate payments:

1. Your business name
2. Your business contact information
3. Your business logo (if applicable)
4. Clear payment terms, such as “payment is due in 30 days of invoice date”
5. Details about the product or service you delivered
6. Hours worked or the amount of products sold
7. Banking details with the name of the recipient if it is different to the business name.
8. Business Tax number (if applicable)
9. Invoice number

STEP 7: Review your accounts

By reviewing your accounts payable weekly, you will be able to see which supplier invoices are outstanding and be able to pay them timeously. To build good rapport with your suppliers it is important to pay them a few days before the due date of the invoice.

When you review your accounts receivable, you will be able to note which clients have not paid you yet and follow up on outstanding payments. It is important to send them a kindly-worded letter that their account is outstanding.

STEP 8: Reconcile your bank statements

Check your bank account against your monthly recordings of expenses and income. This is important to do to make sure no fraud has been committed on your accounts. You will also be able to check if you or the bank has made mistakes on your accounts.

By following these eight steps you will be well on your way to understanding the basics of bookkeeping.

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