Maintain Separate Business Banking Accounts
Mixing your personal and business funds can be a recipe for disaster and may cause legal problems. Maintaining separate business accounts with restricted access limited to only you or specified, designated staff also helps reduce the risk of employee embezzlement.
- Deposit all of your business receipts into your business account.
- Pay all your business expenses out of your business checking account.
- For small businesses with more than a couple of employees, consider establishing a separate account for payroll purposes, transferring funds before each week’s payroll payments.
- Conduct background checks and credit checks before providing authorization to your staff for access to business banking accounts.
Use Automated Invoicing
Automated invoicing simplifies your business accounting. Software designed for small businesses costs little yet saves hours of your time, more than paying for itself.
- Consider what features you need in your invoicing system, such as overdue notices, calculation of late fees or penalties or automatic suspension or deactivation of accounts due to non-payment.
- Set up your invoicing system to run at regulated intervals, such as monthly, so that your customers know what to expect from you.
- Set up a quarterly or semi-annual invoice summary for regular clients.
Balance Ledgers Daily
No one likes bad surprises, and balancing your incomings and outgoings ledger on a daily basis helps avoid unpleasant results. An automated system eases this process.
- Balancing your ledgers daily helps detect employee theft. Employees who handle cash are easily tempted to remove a small amount on a regular basis, accumulating to large losses over a long period of time.
- Finding mistakes is easier when the ledger is balanced daily.
- Balancing the ledger takes less time when done on a daily basis.
Deposit Payments Immediately
Waiting around to deposit your customers’ payments increases the risk that there will be insufficient funds to complete the transaction.
- Stamp all received checks with “For Deposit Only”.
- Make all deposits without beforehand taking deductions for expenses incurred.
- Require that all incoming payments be handed to you or your accountant unopened to avoid theft or misplacement of payments.
- Record all payment information such as check number, customer’s name and method of payment. Use a computerized database to automate this process.
Reconcile Monthly Bank Statements
Ensuring that your records match those of the bank perfectly keeps your business solvent. Utilize automated software to make this process easier.
- Reconcile your bank statements at the end of each month to know your actual account balance.
- Check your monthly statement against your daily statements to check for discrepancies. Software can automate this for you.
Insure Business Vehicles
If you or your employees operate company owned business vehicles, or if you or staff utilize your own vehicles for business use, regularly review your business car insurance coverage to ensure your business is adequately protected in the event of a collision or accident.
- Review your coverage quarterly.
- Get in writing what is covered and not covered.
- Cross check your employees’ driving records with your state’s Department of Motor Vehicles quarterly to ensure they are maintaining safe driving records. Unsafe drivers can increase the cost of your car insurance policy.
Monitor Electronic Transactions
If you accept credit card payments or other forms of electronic debits and payments, monitor these electronic transactions on a daily basis.
- Keep a file for tracking credit card payments from customers.
- Budget for the fees associated with credit card transactions.
Establish Procedures for Bounced Checks
If you accept personal checks as payments for goods or services, establishing a procedure for bounced checks or not sufficient funds (NSF) accounts is critical for managing your business accounts.
- Follow up immediately on bounced checks.
- Review the status of your client’s account to determine if further action is necessary. This can save you headaches and significant losses from maintaining delinquent business clients.
Organization is the key to successful business accounting. Establish separate files for transactions including:
- Unpaid invoices for suppliers and clients
- Paid invoices for suppliers and clients
- Open orders
- Completed orders
- Federal, state and municipal taxes
- Monthly and quarterly bank statements
- Employee information
- Insurance policies
- Equipment warranty and serial numbers
- Business licenses and permits
Review your various budget categories regularly to ensure your business is on track to maintain budget. Line items to review regularly include:
- Supply costs
- Cost per unit of production
- Operating costs including rent, utilities and permits
- Payroll costs
Managing your business accounts is an ongoing process. However, taking the time to keep up on necessary tasks will save you time and money in the end, and may even protect the solvency and profitability of your small business.
Author: Catherine Barnes