Small Business

Why Every Small Business Needs a Recorded Bookkeeping Process

We’re at a stage where every small business owner understands the necessity of having a bookkeeper or accounts department. People are always looking to spend more of their time in their business, not on their business, and one of the largest areas where you can lose time is accounts.

Everyone knows this.

Or at least you’d hope so.

If you don’t have a bookkeeper yet, get one. Or outsource. But you must have something.

One mistake, however, that many small business owners make, is that they hire their first bookkeeper, then sit back and breathe a sigh of relief. Yes, there’s the initial training, but after that, the books start to run smoothly, and hopefully you feel happy with your hire. But something is still missing. Not glaringly so, but absent nonetheless.

And that is a recorded bookkeeping process.

Not as exciting as you might have thought. Recorded bookkeeping process. Probably not the most exhilarating business terms out there. Certainly not as much as “synergistic management solutions” or “impassioned corporate culture”.

If you’re reading this as a bookkeeper or small business owner, you may be thinking, “I already have a bookkeeping process. We use Xero (or Quickbooks). We’re in the cloud now. We’re modern.”

Well, that is something. But all that means is that you literally keep the books. When I say process, I’m talking about a system, a procedure, a set of steps that are consistently taken to keep the numbers humming.

Why Create a Bookkeeping Process?

A small business may not have the luxury of having a different employee for each area of accounts, such as accounts payable, accounts receivable, payroll, expenses, reconciliation, and so on. In all likelihood, there are one or two people at most handling the books. And in some cases, it may be the office manager or secretary.

This is fine. It’s not always financially worth it to have more than one or two at the early stages of a small business. But the inevitable result of having one or two people on the books is that there is a limit on how fast account matters can be dealt with. Having a bookkeeping process speeds this up dramatically. Humans are creatures of habit (read any psychology book or examine your own behaviour), and when we perform tasks habitually, we perform them faster.

That’s not to say that creating a recorded process would cause bookkeepers to work on autopilot. On the contrary, focus and attention to detail are basic prerequisites for keeping the books. Everyone’s heard stories of an extra zero.

But there are clear reasons that cloud accounting, or at least computerised accounting, is the norm nowadays: automation, speed, and accuracy.

Every bookkeeper should have a procedure of how company expenses are recorded and reconciled. Or how bills are paid. Or how customer and clients are invoiced. Or how staff are compensated.

And it doesn’t need to be complicated.

Here’s an example of a bookkeeping process for business expenses, such as coffees with clients, that might be charged on a company card (not bills to suppliers).

  1. Receive pictures of receipts via email (e.g., accounts@yourcompany.com.au)
  2. Forward to Hubdoc for processing (see further)
  3. Review and publish to Xero or other software
  4. Reconcile with bank feeds

(Hubdoc is an online software which extracts information from bills and receipts and then allows you to publish to accounting software, eliminating data entry and human transcription error. It can also automatically pull bills from accounts such as your internet provider. This article is not sponsored.)

From start to finish, the above process takes under a minute once you’re comfortable with the software. I have one of these short processes for every function of in-house bookkeeping that I do.

Write. It. Down.

By now, you should understand how a recorded bookkeeping process can save you time, increase efficiency, and boost accuracy.

Now let’s talk about the first word of the term: recorded.

Like any business system or procedure, keeping it in your head isn’t the smartest idea. Two more of those hair-raising phrases are “future-proof” and “scalable”.

If something happens to the bookkeeper at a small business and they have to take unexpected and sudden leave, the bookkeeping process needs to be available for the replacement (temporary or otherwise). And it has to be easily understood and used. When creating the bookkeeping process, include as much information as would be necessary for someone with adequate bookkeeping knowledge, but not much in the way of how your specific business runs. If it’s too brief, it’s useless. If it’s too dense, it won’t be used. Strike a happy medium.

Additionally, as your business grows and you begin to require more staff to handle your surging orders, expenses, and payroll, the last thing you want is an extended onboarding process for your new bookkeeper.

Yes, the books are an essential and necessary component of every thriving business, but you don’t want to be spending inordinate amounts of time teaching them how to do their job within your business.

Instead, new hires will be able to learn most of what they need to know from the recorded bookkeeping process, and if they have further questions, they can speak to other members of the growing accounts department.

Don’t Trust the Process

The final thing to remember in the creation of a bookkeeping process is that it is not meant to be set-and-forget. Just like a budget, the process should be reviewed periodically to determine it is up to date and doing its job, or whether it can be tweaked and improved.

If you or your bookkeeper stumble across a better way of doing things, update the process.

But even if you’re not interested in looking for ways to speed up your bookkeeping, or you don’t like the idea of using online software services, that doesn’t mean you shouldn’t create a process. The other benefits mentioned above still apply.

So if you’re all about scaling, maximising, or 10Xing, but you don’t have a recorded bookkeeping process in place, the new year might just be a good time to start.

This story is published in The Startup, Medium’s largest entrepreneurship publication followed by +406,714 people.

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Source

neallesh@yahoo.co.uk

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