Track your Business Transactions

A business is more than simply an operation buying and selling goods and services. Things would be much easier if it were just that, but then the business would find it very difficult to grow any larger because there would be no record or measuring stick of how far it had already come. An accounting system of some type is needed; and although it can sometimes be tricky, you really don't have to be a math whiz to keep track of it.

Simply put, the name of the game is cash flow, and cash flow can either be positive or negative. When money comes into the business, it's a positive cash flow. When money goes out, that's negative. Simple enough, isn't it? But, many companies experience financial trouble because they just can't get a handle on their books (which are, in their purest form, simply a record of the operation's cash flow). If you're starting a small business, do all you can to begin on the right foot by keeping the cash flowing in a positive direction. Here are some tips that will help you track your organization's transactions:

Write the transactions down. You can use either a ledger book or a computer spreadsheet. Start with the balance forward when you begin your business. From there, just start recording your monthly payments going out and receivables coming in.

Use categories. Yes, money comes in and goes out, but for what? Try using "Cash In" and "Cash Out" as general headings with specifics recorded underneath. If, for example, you pay out $2,500, it should be stated that the money went for rent, supplies, advertising or whatever. This will also help you to set up specific categories in a general ledger later on.

Manage your cash flow. Who will handle the books? It often happens (both in personal and business finances) that if more than one person is withdrawing money, accounts can quickly get out of sync due to a lack of communication. Therefore, choose one person to handle the financials and establish a chain of command for processing incoming and outgoing payments.

Use a master checkbook. One checkbook is better than two. Going further, one check writer is better than two. When paying bills, use a numbered checkbook and keep the checks in consecutive order. Many checkbooks provide either a carbon copy or a small stub attached to the check that's used to record the payee and the amount paid. It's left in the checkbook binder when the check is torn out.

Make deposits every day. Some people are tempted to wait until the end of the week to deposit their checks. This may be fine for personal accounts, but it's crucial for businesses that the actual date of payments received and made has a 'trail' for verification purposes. It's also wise not to keep too much accumulated cash on hand, for obvious security reasons.

Collect monies from clients as soon as possible. The longer a payment goes unpaid, the longer your books will be unbalanced. The records may show that a transaction took place, but your coffers may still be empty. If at all possible, limit payment terms to thirty days, and no more than sixty.

A business can quickly go under if its finances are in disarray. These simple steps may seem a bit cumbersome at first, but they'll quickly become second nature, and you'll be glad that you heeded them.

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