Bookkeeping and managing your company’s business transactions can simultaneously be the most dreaded and the most important task to your business’s financial health. Staying on top of the business’s transactions is equally important to small and large businesses alike. In a small company, there is likely to be less of a checks and balance system in place for the transactions that take place. Whereas larger organizations may face a different problem of having hundreds of transactions and a team of accountants to oversee.
Regardless of business size, there are a few regular practices that you can implement to stay on top of your funds, and a few things to avoid to ensure that your accounting reconciles without issue:
Always enter transaction details
Whether it’s a small lunch with a potential partner or a large scale event, you’ll want to remember to enter the details of every transaction as soon as the tab has been paid, or risk forgetting to do it later. The further away you get from the expense or income, the more difficult it will be to catch or correct errors later.
Always put agreements with vendors or other B2B in writing with the assistance of a qualified business attorney
Entering into a partnership with a new business partner or vendor? Make sure your agreement outlines all of the pertinent details including:
- Payment details & frequency
- Remedies & dispute resolution
- Contract termination circumstances
- Which state’s laws will preside over the contract
Make sure every transaction reconciles
Along with entering every transaction in a timely and detailed manner, you’ll also want to make sure that every transaction reconciles. Experts recommend doing this once a week, or at the very least, once a month. Make sure to reconcile your transactions against the records of your banking, credit cards, and lines of credit.
Ignore control risk
This is especially important to bigger operations. You should always be aware of who has access to what accounts and in what capacity. To minimize control risk, you should always be cognizant of who has access to:
- Credit card numbers
- Online bank logins
- The ability to perform wire transfers
- Has signing authority
Commingle business and personal expenses
Entrepreneurs and small business owners: this one’s for you. It is extremely common for those just starting out in business to mix business and personal funds. But borrowing a little from one pot to fill another can quickly become a habit that could have negative effects on your business’s bookkeeping and your ultimate personal liability if your business is sued. The movement of money, where it comes from, and what it’s used for are all scrutinized when tax time comes around, or when you’re looking for a loan or trying to verify company worth. Keep these expenses separate and you’ll always know how much your business is making and spending.
Keeping good track of your business transactions—whether they are business to business, with vendors, or simple lunches out—will save you a world of headache down the line. Employing a knowledgeable accountant helps, but knowing what to do and what to look out for yourself strengthens your business’s financial security.
As always, employing an experienced business law attorney to assist with your business contract drafting and review is recommended. If you have questions regarding your business contracts, the dependable team at The Campbell Law Group can help.
Give us a call today at (305) 328-9506 to find out how we can help you and your business.