By Kristy Bohling (Financial Education Consultant for ACCION USA)

As you prepare your business for tax season, you may be wondering how to organize your financial records so as to produce and file accurate tax returns.  On February 2, Myrna Stacey, CPA joined the ACCION USA financial education team to present a webinar on good recordkeeping strategies (listen to the recording on our online workshop archive). To sum it up and highlight the importance of recordkeeping, the following is an overview of Myrna's words of wisdom.

What are the Benefits of Keeping Good Records?

If you are a one-person show at your business, keeping consistent and accurate track of your finances might get put on the backburner as you grow your business.  Keep in mind, though, that there are many benefits to keeping good records such as:

• Being able to produce and file accurate tax returns, possibly saving you money
• Determining if you are selling at the right price
• Ensuring your costs are in line with your income
• Knowing what percentage of every dollar gets spent on payroll, utilities, etc.
• Identifying what revenue number is needed for you to make your goal salary
• Recognizing if you have enough profit left over to service your debt

Keeping good records ultimately helps you to plan effectively, using the information they provide to make strategic business decisions and proactively move your company in the direction you want it to go.

Picking the Right Software

Understanding the importance of recordkeeping is the first step in organizing your business's finances, but how to organize them is another question.  There are many options and it can be difficult to choose the right software for you and your business.  Start with the following questions:

• Do we manufacture a product?
• Do we maintain inventory?
• Do we collect sales tax?
• Do we need job costing?
• Do we need time tracking?
• Do we produce estimates?
• Is there industry-specific software for our operation?

Picking the right software may depend on the answers to the questions above, pricing, and your (or your bookkeeper's) ability to use the programs.  At the high (expensive) end, MAS 90, Macola, Great Plains, and Platinum may be good options and at the low (inexpensive) end, QuickBooks, Peachtree, MYOB may meet your needs (see prices below). Once you buy software, make sure you, your bookkeeper, and your staff understand the processes so you can report information efficiently and accurately.  A fixed cost now can result in hundreds or even thousands of dollars in savings later if you take the time and resources to track your business' finances.

• QuickBooks: The 2010 version is available for about $200 for 1 user
• Peachtree: The 2010 version is available for about $200, with a multi-user option
• MYOB: The 2010 version is available for about $300

Tip:  Depending on your business' needs, you may not need the most recent versions of the software listed above.  Carefully consider your business' needs and match them with the features from previous years' versions, which are often more inexpensive.

These programs sound good, but how do I make time for bookkeeping?

If you're a small business owner, you may likely prefer developing your business, making new contacts, and promoting your product over keeping track of your finances.  If you don't track your finances, though, you may no longer have the funds to do the stuff you love.  If you choose to do your business bookkeeping yourself, remember to stay organized and keep everything.  This involves keeping files or organized folders of the following documents:

• bank statements
• cancelled checks
• receipts for purchases made with cash
• bills paid by vendors
• every check received (with deposit slip received from the bank)
• invoices
• government documents

What about hiring a bookkeeper?

If you don't have the time, and you have enough revenue to do so, consider hiring a part-time bookkeeper to track your finances.  A bookkeeper's responsibilities include processing daily transactions correctly and producing financial statements such as the Balance Sheet and the Profit and Loss Statement, which should help you as the business owner understand the financial story of your business. The bookkeeper should also know your bookkeeping cycle, which includes the revenue cycle, the cash disbursement cycle, entering credit charges to expense accounts, and understanding the difference between fixed assets and expenses.

STAY ORGANIZED NOW TO SAVE MONEY AND GROW YOUR BUSINESS FOR YEARS TO COME!