Most small business owners just hate the idea
of having to keep books. But as a business
owner that's one of your primary jobs. The
difficulty is really three parts to it. There
is setting up the books, there's the data
entry and filing that goes with it and then
finally there's the analysis of what those
numbers mean. Now I tell people that setting
up books is kind of like learning word, Microsoft
word, and English at the same time. It's very
difficult. Because you've got to learn a bookkeeping
system plus you've got to learn a software
system at the same time. So it becomes difficult
and it becomes frustrating. But as I said,
this is a job that is yours as the business
owner. So once you've set up a chart of accounts,
that's the accounts where you know your income
is going to go, where your expenses, your
car expenses, your advertising expenses, but
it's also the balance 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
need to be set up to reflect how you actually
do business. That's the key. And even though
most of you don't want any part of this, I
implore you as a business owner, you've got
to do it in order to set it up the way you
want it. So once you've got the accounts set
up the way that makes sense to you, so you
can look at the accounts and say I know what's
in there, I know what kinds of transactions,
or receipts or dollars are in that account.
Just intuitively, I know what's in there,
then the next step is how to do the data entry
and to keep up with the day to day filing,
processing receipts and all of that kind of
stuff. Well again, most business owners the
first person they want to hire is a bookkeeper
and do all of that so they don't have to.
We suggest strongly that you need to do that
until you have decided exactly how you want
most transactions processed. Where you want
them filed. For instance, you've got a land
line phone and you've got a cell phone, do
they both go into the same expense category
telephone or do they go into different places.
You may have postage expenses. Do they go
under administrative postage or do they go
under administrative and marketing or maybe
freight. You've got to make 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 come across
a new transaction, write down in the notebook
exactly how you want it booked. So if you
get a phone bill, we're going to book that
to this account. If you get a freight bill,
we're going to book it to this account. So
exactly how do you want it done. Once you've
got eighty, ninety percent of the transactions
done, and some are tricky. Things like how
are you going to do refunds, how are you going
to do prepaid deposits, some get tricky. Once
you've got those figured out then you can
delegate that part to a clerk or some kind
of a data entry person. Then the third step
is really the owner's job. And it's periodically
reviewing the books and doing quality control.
And saying what are these numbers trying to
tell me. My sales went up, my expenses went
down. Why did sales go up, why did expenses
go down? Is there a mistake some place? What
are the numbers trying to tell you about what's
happening to your business. Now as a small
business owner, you intuitively know what's
going on. But the books become the validation
of what you think. Lots of business owners
go out of business because what they think
isn't true. So keep a good set of books to
make sure that your assumptions actually reflect
the facts.