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Responsible Record-Keeping

Maintaining your businesses financial health is a combination of planning, organization and financial management. Many businesses have been sunk by bad record keeping. Here’s an example. A dear friend, who happens to be an accountant, hired a furnace expert to solve a heating problem. He came to her house, identified the problem and quickly got to work. The repair took a short time and her furnace worked marvelously. She thanked the repairman profusely and sent him on his way. He told her the bill would arrive in the mail. Two weeks passed. No bill arrived. Another week passed and no bill. She called his office to remind him to send a bill. Another week passed and she called again. The bill never came. Bad business? Yes. Rare? No. Ask a dozen people and you are likely to hear similar stories. If a client has to ask you multiple times for an invoice, your business is doomed. A few simple steps when you start your business will save you headaches and lost business down the road.

First, use accounting software to record sales, create bills and pay invoices. Accounting software does much of the record keeping work for you. You can set up customer accounts, enter sales, create invoices, track late payments, and monitor expenses and bank accounts easily. By keeping your business information in one place you won’t have to wade through a pile of paper to see if you invoiced a client or received payments. To find information about software for your business, run an Internet search on bookkeeping or accounting software to compare popular brands.

Second, always keep your personal finances separate from your business finances. This means establishing business checking and savings accounts, using a business credit card for business purchases and documenting personal money loaned to your business. Make sure to record any payments back to yourself so that your accounts are kept balanced.

Third, save all business-related receipts in an easy-to-remember location. A file folder, storage cabinet, even a shoebox will work. Include anything related to travel, office equipment and supplies, transportation, software, and any other business-related purchases you make. If you use your personal car, computer equipment, and phone for business purposes make sure to keep all receipts relating to the business use of those items. If your business makes charitable donations keep those receipts as well. You will need your receipts when tax time rolls around to figure out your tax deductions.

Spend time up-front establishing proper and accurate bookkeeping procedures so you can spend the rest of your time managing your profits rather than counting your losses.

Learn more about managing a home business in Managing Your Business the Toddler Way by Michelle Novak.

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