Keeping good records, the key to success?
Often in a business, the financial plan can be great, the ideas amazing, but the business falls apart because the owner and managers are either too disorganized or too lazy to keep accurate records. This article from MECC Small Business Devlopment Center discusses ways to keep your business organized and keep records in line so that you can accurately predict where your company will go in the future.
One difficult issue to decide when maintaining a business is whether or not to hire someone to maintain your financial records for you. While it can be an expensive proposition, as the article points out, "bear in mind that solid financial advice frequently can increase your profits, more than covering the professional fees." Thus, especially because I know a lot of people who are entering the field of accounting and finance as personal friends, I would probably go after a professional to maintain my records for my bar. However, even without a possible discount, saving yourself the time and stress to just go ahead and have someone do all of the dirty work for you would most likely be worth the cost.
But who should you hire and what should you look for when hiring someone to keep track of your accounts? As the article lists, you should try to find someone who has a good educational background and extensive and broad experience. Going into the bar business, I would probably try to look for someone who had a background keeping records for a bar or resteraunt that would know the ins and outs of what I was planning on doing. In addition, it would help having the experience to be able to give other forms of advice should issues arise.
Another good reason to maintain proper records (and to have someone make sure your records are properly maintained) is that time of year that is everyone's favorite, tax season. When the IRS comes to your company asking for accurate records, having everything stored away properly will save you tons of time and headaches. Without good records for your company, you could end up either overpaying or underpaying your taxes, crippling the future of your company. Running a bar, there would be a lot of potential things being bought and sold and tons of accounts to keep track of. Having to scramble at the last second to try and figure them all out could be next to, if not impossible.
The article gives a checklist that you should follow to make sure that your records are being maintained properly including the following:
One difficult issue to decide when maintaining a business is whether or not to hire someone to maintain your financial records for you. While it can be an expensive proposition, as the article points out, "bear in mind that solid financial advice frequently can increase your profits, more than covering the professional fees." Thus, especially because I know a lot of people who are entering the field of accounting and finance as personal friends, I would probably go after a professional to maintain my records for my bar. However, even without a possible discount, saving yourself the time and stress to just go ahead and have someone do all of the dirty work for you would most likely be worth the cost.
But who should you hire and what should you look for when hiring someone to keep track of your accounts? As the article lists, you should try to find someone who has a good educational background and extensive and broad experience. Going into the bar business, I would probably try to look for someone who had a background keeping records for a bar or resteraunt that would know the ins and outs of what I was planning on doing. In addition, it would help having the experience to be able to give other forms of advice should issues arise.
Another good reason to maintain proper records (and to have someone make sure your records are properly maintained) is that time of year that is everyone's favorite, tax season. When the IRS comes to your company asking for accurate records, having everything stored away properly will save you tons of time and headaches. Without good records for your company, you could end up either overpaying or underpaying your taxes, crippling the future of your company. Running a bar, there would be a lot of potential things being bought and sold and tons of accounts to keep track of. Having to scramble at the last second to try and figure them all out could be next to, if not impossible.
The article gives a checklist that you should follow to make sure that your records are being maintained properly including the following:
- How much income are you generating now, and how much income can you expect to generate in the future?
- How much cash is tied up in accounts receivable (and thus not available to you) and for how long?
- How much do you owe for merchandise? Rent? Equipment?
- What are your expenses, including payroll, payroll taxes, merchandise and benefit plans for yourself and employees (such as health insurance, retirement, etc.)?
- How much cash do you have on hand? How much cash is tied up in inventory? What is your actual working capital budget?
- How frequently do you turn over your inventory?
- Which of your product lines, departments or services are making a profit, which are breaking even, and which are financial drains?
- What is your gross profit? What is your net profit?
- How does all of the financial data listed above compare with last year - - or last quarter? How do they compare with the projections in your business plan.
- How does all the financial data compare with those of your competitors? With those of the industry?
posted by Garrett W. at 9:45 PM
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