Do it Monthly

Every month, you should calculate the profitability of your business by putting together an income statement. Ideally, you should also examine your balance sheet. By looking at your financial statements every month, you can quickly adjust expenditures and sales efforts to keep your business within budget. Otherwise, at the end of the year, you will probably find that your expenses have crept upward, leaving your profit margin below your initial projection.  

Meticulous Records

No matter how strong or weak your understanding of accounting is, you need to keep very careful, well-organized records.

One reason to keep good records is for tax purposes. If you ever get audited, the tax people are going to want to see some receipts, not just cancelled checks. If you can’t produce the receipts requested during an audit, the IRD isn’t going to be understanding about it!

There are lots of other reasons to be organized. For example, it is not uncommon for large, as well as small, companies to pay the same bill twice—sometimes overpaying by thousands of dollars. And it isn’t uncommon for vendors to claim that you never paid a particular bill despite the fact that you have. 

Basic Principles

Don’t be awed by accounting or its fancy terminology. The basic concepts are very simple. Even if you decide to use an outside accountant on a regular basis, you need to invest some time in understanding the basic principles yourself.