While you may be able to hire others to manage your financial operations, good recordkeeping systems are your business. Your recordkeeping system will be the basis for all your financial management systems so accurate processing and easy access to these records is critical.
The basic financial systems for your business should include information from the following functional areas:
Banking Relationships -- Checking/Credit
Bill Payment -- Payroll, Taxes, Suppliers, Rent
Money Collection -- Cash, Credit, Payment Terms, Collections
Purchases -- Suppliers
Sales -- Pricing, Marketing, Advertising
Information Gathering and Reporting -- Cash Flow, Balance Sheet, Net Worth
Other Professional Relationships -- Accountant, Bookkeeper, Suppliers
Systems need to be developed to keep track of each of these types of information.
For a start, set up a separate checking account for your business. If you need to make cash purchases, write a check for petty cash so that is recorded in an official record - don't take money from your cash receipts to pay expenses. You need to be able to substantiate receipts with your records. Petty cash itself needs a separate ledger supported by receipts so that cash transactions are recorded appropriately. Cash is one of the weak points of many businesses. Inadequate control can siphon away income and it can also leave you open to unexpected governmental audits.
Set up a ledger to record all transactions. This can be handwritten or generated with a computer software package. The important component is to keep track of each financial transaction, categorizing each entry. Each type of business will have different types of categories for transactions. If you are in doubt about which ones to use, pick the categories on Schedule C of the U.S. Internal Revenue Service forms. If you are going to be filing taxes in the United States for a business, you are going to need to have your income and expenses categorized that way at reporting time anyway. Keep your ledger up-to-date daily. Don't put this off. You will forget details.
Store receipts in the same order they are in the ledger. Some people go so far as to have a separate envelope for each month of receipts by category. That depends somewhat on how many transactions a month you have. Businesses with only a few transactions monthly clearly have fewer receipts to manage and can get by with a simple system. The important thing is to have a clear cut place to put everything as soon as it occurs so that you do not spend valuable time at the end of the month trying to piece together needed details that have long since been forgotten.
Check your bank statements and any credit statements monthly. That means keeping the check book balanced and the credit card statements cross referenced with purchase receipts. And reconcile bank statements faithfully.
Basic information should be kept on each customer and what they buy, unless you are handling a huge number of small transactions and have a very large customer base. This customer information can be a valuable tool in marketing and learning who your customers are and what they want. If you are offering credit, credit reports on clients can also be part of your information database.
Ditto for employees. Have a way to keep track of personnel forms, including all the tax forms you will need for reporting payroll. Many office supply stores have forms already available that are set up to gather precisely the information you will need. If you are paying and/or deducting auto expenses, they will also need to be recorded.
Each piece of equipment needs it receipt and service schedule recorded so that if a problem arises, the information is readily available. This information is also needed for calculation of depreciation.