Whether you are just starting out or been in business for decades, your accounting department is a potential source for absolute unmitigated disaster or for unleashing the potential for the next level of success.
It is only too common that owners have little or no education or experience in bookkeeping/accounting, have no real interest in how it works, and may even be mathaphobes. Imagine for a moment that you are attempting to play baseball, but don’t know which end of the bat is which. An exaggeration? Barely!
Having a basic understanding of your books is so critical that I recently spent a year writing a book on the subject with my co-author Shaila Chamberlain, CPA, CMA, MBA.
You can get the book on Amazon.
For a quick introduction to what we cover at great length in the book,
Please enjoy this VIDEO SERIES.
You Need Someone to Be in Charge of the Accounting
The first hire in most businesses should be your assistant. This assistant will generally have multiple hats: Customer service, accounting, purchasing, and keeping you out of trouble. Only one of those absolutely requires education and/or experience-accounting.
Sometimes, smaller companies outsource the accounting to a local bookkeeper, CPA, or to an offshore Virtual Assistant (VA). As your company gets larger, the amount of time and sophistication required to properly account for your transactions and accounts will grow, too. Setting up good book early is highly recommended.
You Must Keep Track of Your
Assets and Liabilities or You Won’t Last in Business
ASSETS ARE: Cash, receivables, equipment, fixtures, material, finished goods, vehicles, buildings, and other things that have an ascertainable value.
LIABILITIES ARE: Payables, notes, accrued labor expenses, taxes, and other things that you owe to others, including governments.
Every business transaction has an accounting component. You sell a product or labor, and you now have either cash from that transaction or a promise to pay. You keep a record of these things through invoices, ledgers, journals, and eventually statements. If you don’t keep a record, you might forget that Brian owes you $100 for those shirts you sold him.
As your business builds, you will have hundreds or thousands of transactions per week that need to be organized, processed, analyzed, and reported on. Eventually, the total of these transactions will be used to help you secure loans, create partnerships, sell stock, sell the company, and of course, pay taxes.
We will look at each element of your accounting department (whether all those hats are worn by you or you have many employees doing the work.
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