In order to manage effectively and wisely, there are four accounting tasks every business owner must know and put in place for business success.
- Setting Up an Accounting System
The very first accounting tasks required is set the accounting system for the business. An accounting system is simply a process or a procedure that tracks and reports the day-to-day financial transactions of your business. The transactions will usually originate from the key accounting cycles (Payable, Receivable, Inventory and Bank) and supported by documents such as purchase orders, goods received notes, invoices, receipts, deposit slips, cheque books etc.
An accounting system can be prepared manually with a notebooks, Microsoft Spreadsheet programs or a well-tailored and already designed accounting software.
It is important to understand that the system you adopt will ultimately determine the volume of data you track, how the tracking is done and the reports that are being prepared! Thus, it’s necessary to engage the assistance of experts in accounting and business management system to assist design the system for your new company.
- Entering Transactions into the System
Once the accounting system has been created, the next task is the day-to-day entering of data into the accounting system. Data capturing can be time consuming, very disruptive and sometimes resulting in more time being spent on back office rather than on the business.
Business is simple, it is all about buying and selling, however these administrative/ book keeping tasks create nightmares and sometimes prevent business owners from achieving their business objectives, i.e profit. That is why you need to make the decision to either discipline yourself to do it yourself, subcontract to an accounting firm, hire a bookkeeper or use an external accountant
“8 out of 10 entrepreneurs who start businesses fail within the first 18 months…. … Businesses need to at least get the basics right in order to survive…” – Eric T Wagner – Forbes
- Processing the Financial Data
Once you have entered the financial data, the next step is to begin the data processing task. Processing the financial data is nothing but to close each business day’s accounts before moving to the next business day’s work, so you can easily prepare financial reports.
The financial data will eventually be used to prepare the financial reports and budgets of your business. These are vital information that will help the management, staff, investors, customers, bankers, and creditors!
- Preparing Financial Reports
In school, academic reports measure how well a student is performing. In the hospital, when the doctor issues a health check report, that report shows how well your body is performing. In business, the financial reports indicates how well the business is performing financially.
There are different types and kinds of financial report required to measure the various aspect of your business health. Reports such as the status of your customers, total sales made, total accounts receivables, gross margin, net operating expenses, earnings before taxes, net profit, net worth and many more are very critical in building and developing your business!
What’s on your mind concerning the four accounting tasks? Share your comments below.