Top 10 Do’s and Don’ts for your business bookkeeping practices

You’ve decided to take the plunge and open your own business or buy an existing one. You are an expert in the field that you are undertaking – whether it’s opening a floral design, wedding planning, automobile repair, or a sandwich shop; but are you an expert in bookkeeping and accounting? Do you even want to be?

As an entrepreneur, you should focus your energies and efforts on doing what you do best and leave the bookkeeping and accounting to a professional. The caveat there, though, is the professional that you hire to keep track of your bottom line needs to keep you in the loop when it comes to the health of your business. Here are the top ten do’s and don’ts when it comes to your business’s financial health.

TOP TEN DO’S

1. Even if you hire a professional to do your books, you should have a basic understanding of bookkeeping. If only to keep costs down you should know how to track your monthly income and expenses.  
2. Before you open the doors on your business, consult with an accountant that is familiar with your industry before you start.
3. Determine what accounting software program works best for your business; there are many software program choices on the market.
4. In the beginning, you may want to do your own weekly bookkeeping to help keep costs down and so you have an understanding of where your money is going.  
5. Depending on the type of business you own, determine whether you need to track inventory and implement internal controls to safeguard against potential loss of property.
6. Take the time to reconcile your bank account on a monthly basis.  
7. Maintain a cash flow spread sheet and update it at least weekly, using the bookkeeping software you’ve chosen.  
8. Outsource your payroll and payroll reporting to a payroll service provider; they have the skills to keep up with the myriad state and federal reporting that is inherent with payroll.
9. Put together a financial statement (budget) at least once a month.  
10. Set up separate business bank accounts and keep your business records apart from your personal records.  

TOP TEN DON’TS

1. Make certain you have “vetted” the individual you may delegate check-signing authority to.  
2. Never commingle personal and business assets – that includes cash.
3. Money withheld for sales taxes, mortgage payments, sales taxes, etc. should not be used for other purposes.  
4. Hand off cash flow projections to someone else. You need to know the liquidity of your business.  
5. Be overly conservative in expense projections and conversely don’t be overly optimistic in your sales projections.
6. Rely on a handshake or verbal agreement when it comes to making purchases for your business.  
7. Sit down and write checks for invoices without matching it to a purchase order.  
8. Wait until you’ve painted yourself into a financial corner before contacting a lawyer or accountant.  
9. Put off establishing a relationship with a banker until you need financing.  
10. Overlook seeking advice from your accountant and lawyer on important financial matters.

While your accounting needs are more complex than what’s covered here, this is a quick checklist of things to keep in mind when you’re jumping into your new business endeavor. As always, if you have questions about bookkeeping and accounting, we are here to help.