Discovering that your small business books are a mess can be disheartening and overwhelming. It can also be hurting your bottom line. But you can sort through things and get them back in order. Here is a handy guide to getting your accounting back on track.
Recognize the Problem. Messy books may be something you or your employees have gotten used to. But it's important to understand that it can easily be costing you money if you don't know exactly what debts and obligations you have, who owes you money, or what your profit or loss is at any time. Start your makeover by taking the matter seriously and looking at it as an investment in your business and in increasing your profit.
Decide Between Fixing and Starting Over. If the books are in a really bad state, you may not be able to fix them as they are. Unraveling what's been done and how it's been done might cost more time and money than it's worth. In this case, simply starting over might be in your best interest. You'll likely need to recreate some transactions and independently balance the new accounts against things like recent bank statements, accounts receivable and accounts payable records.
Hire Help. If you've been doing the books yourself, it may be time to hire some professional help in the form of an accountant or bookkeeper. He or she can help set up proper systems and methods, an accounting program, and a schedule of what needs to be done on a daily, weekly, and monthly basis. Once you're up and running, you may be able to do some of the work yourself later on. But getting things set up well is the first priority, and it's good to get experienced assistance.
Clean Up Physically. While you're focused on fixing the metaphorical mess within your accounting records, it's also a good idea to fix any physical mess related to it. This means getting rid of any piles of papers, handwritten methods of tracking expenses, and disorganized files. Make sure employees are all doing accounting tasks using the same methods. Create a bookkeeping work station if possible. And consider converting from messy paperwork to digitized records to help keep things organized.
Create a Schedule. One of the reasons that a small business ends up with disorganized books is that it's hard to find the time to do the books on a regular basis. Fight this problem by scheduling time daily, weekly, and monthly to work on your books. While it may be difficult to carve out time at first, doing so is the only way to avoid falling back into chaos. Meet with your accountant or bookkeeper regularly and discuss any questions. As you keep your books up to date, you'll likely see the difference in your bottom line and how efficient you're becoming. This will help you stay committed.
By following these steps, you can reconstruct your business books into something that helps you turn a profit. And, while it may take some effort at first, the end result will be a more successful business and less stress for you as the owner.