Why are you in Business?

Let me ask you a question:  why are you in business?  I am sure your answer is to earn money, to make a living, or to prepare for the future.  Then let me ask a second question:  what is your most important tool to manage your money?  Do you keep track of your bills and receivables in your head?  Do you go online to your bank to find out how much cash you have?  If this is how you keep up with your financials; does it make you a bit nervous?

Do you use an accounting program, such as QuickBooks or Peachtree, so that you can give your tax preparer your financial reports in January?  Is that all you use it for?  Maybe you use an excel spreadsheet to track your financial transactions.   Why should we, as business owners, take the time to set up and maintain an accounting program – our “books?”  This is a good question and there are many good answers.  A good program is specifically designed to pull data that you or your bookkeeper enters and then uses that data to create reports to provide you with essential information, to keep your “book” balance reconciled and current, to remind you of important financial tasks, and to make your financial life much simpler.

If I want to know how much money is owed to me, I run a receivables report.  How much cash will I need to pay my bills this month?  I run a payables report.  Will I have enough money to pay my bills by the end of the month?  I take my book balance + receivables (to forecast cash) – payables = Uh! Oh!  I much prefer to say “Great!  I can do it.”  But if it is Uh! Oh!  I need to know that sooner rather than later.  An essential part of my financial management is looking ahead to my financial needs.  This gives me the opportunity to prepare and to stay ahead of the business of running my small business.

An accounting program will create invoices for you which will point to your receivables reports.  It will help you manage your bills by pointing to your payables reports.  It will keep track of your loans, credit card expenditures, fixed assets, payroll, and more.  Want to know your profitability of a single item in your inventory?  There is a report for that.  How much sales tax do you owe for last month?  There is also a report for that.  And, how much money did I make on that job?  Yes, there is a report for that too.  The Balance Sheet, the Profit & Loss, and all the different reports I just mentioned pick up data from the transactions that we entered.

Having good financial data and good historical financial data is essential in creating a budget and forecasting cash flow.  This data will also help you analyze your profitability to see if it is what it should be and whether to make any changes.  This is a good time to meet with your accountant to strategize what, if anything, you should be doing differently.  What is the impact on your tax liabilities?  How much in estimated taxes should you be sending to the IRS and the state?  You know about one-stop shopping.  Everything you want to buy is in one place.  Well, your books are like that too….. we could call it one-stop financial: all your financial data in one place.

To make good business decisions, you must have good financial data.  I know, the products or services you sell are extremely important and should be part of your primary focus.  But you can’t have one without the other.  If possible, keep them current, on a daily basis, so that you have real-time financial data.  Remember….. that’s why you are in business.

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Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.

Touch It Once Then Act on It

Let’s talk about going green.  Yes, going green.  There are many ways you can keep a green office.  But there is more to having a green office than saving the environment.   The most common commodity we all work with is paper….. to me, a close second  is my time.  If I can save a tree or two and save myself time so that I can take a guilt-free lunch, then I want to do it.   One side benefit is that I make my office more efficient.  I’ll save some of my tricks for another time, but let’s start off with one thing I do to save time!  I have to admit that I’m partial to this one.

Be Smart – touch it once….  Be Smart – be efficient and thrifty….. touch it Once

Be disciplined.  When you open your mail or paper is handed to you, categorize it immediately.  If it is trash, toss it or recycle it; if it needs to go to someone else for action, address it and put in your outbox; if it needs to be filed, put it in your filing box.  If action can wait, create a tickler file.  If it is urgent, put it in your action folder.  Touch it once then Act on it!

How many times have you looked for an important piece of mail that you are sure you received but for the life of you can’t find!  Is it in this pile or in that pile.  Is it – OH NO!, did I throw it out with the trash?  There is a dance we have all done in our office, it’s called the “paper shuffle.”  Sound familiar?  Where is it; what did I do with it?  You’ve got to touch it once then act on it!  I live in a highrise condo.  Every day, I see my neighbors open their mail boxes and before they head for the elevator, they go through their mail and toss in the bin all the junk!  They don’t even bother taking it upstairs where it will eventually be added to their desk clutter.  They touched it once, they acted on it!  Be disciplined!  That is what it takes.  If you truly can’t go through your mail at that moment, keep it in your inbox so that it doesn’t get mixed with other things.

I have some other ideas for going green that benefits both you and the environment.  These include using “quiet time,” efficient filing systems, electronic filing (my new favorite), and the list goes on.  Remember…. Be Smart – touch it Once!

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Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.

Document Retention for Small Business

Frequently small businesses ask me as a professional bookkeeper varying questions about document retention.  I am not going to tell you which documents you should retain.   This information needs to come from your CPA, attorney and/or your corporate headquarters.  I want to write about document retention because ultimately, you may be responsible for archived documents.  There are certain documents that you will be required to keep on file and available if needed by auditors.  Not only must you have them, BUT you must be able to retrieve them – which box and which folder.   If you can’t find it, then you don’t have it!

Learn which documents you must retain and for how long.  Find out if electronic copies are acceptable or if you must keep hard copies.   I will write about my best filing system another time, but a few tricks concerning retained documents:

  1. Use colored dots to mark the corner of files you will need to archive at the end of your fiscal year.  Then all you will need to do is pull those files and place them into an archive box for storage.
  2. If you have a single document and not a year’s worth of similar documents, it is okay to create a folder for one document, label it and then color tag it.  This makes it easier to retrieve this document if it is needed.  I always give critical documents their own folders.  [HINT:  I will make an electronic  copy of an archived document if it is something I may need to refer to from time to time.]
  3. Part of my filing system is to keep an electronic catalog of all my files.  Not only does it make it easier to find a document or folder (I’ll write more about this another time), it makes it very easy to create content lists of archived boxes.
  4. Number your boxes and label them with the general contents and dates.
  5. Your boxes need to be stored someplace where they will be safe.   If your basement floods easily or is subject to dampness, don’t put them there.  If your attic has insects, don’t store them there.  If you have a lot of boxes don’t stack them beyond their maximum load; the boxes can become damaged and will collapse.  You might consider checking into commercial storage companies.  They will pick up your boxes and will deliver boxes back to you if you need to retrieve a document (see the value of having a good list?).  These companies can be expensive, but may be worth the cost if you have neither the space nor a good, safe location to store them.
  6. If electronic copies of your documents are allowed, typically certain guidelines must be followed.  Some of the requirements will include minimal redundancy of your electronic files, where the electronic data is stored, legibility, etc.  You must obtain a copy of those guidelines and adhere to them.

Retention is a very important topic and should be part of your company’s Policies and Procedures.  Documents that must be retained should be known to anyone in your company who works with them.  I recommend also that document management be assigned to someone who will take responsibility.  That person might be you, because ultimately the liability is yours.

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Sue McLaughlin is the founder and principal of McLaughlin Bookkeeping Services, LLC and MBS Bookkeeping Seminars. Her mission is to offer small-business clients a fair price for bookkeeping services while delivering excellent customer service.