Wednesday, July 22, 2015

How to handle bookkeeping and accounting for a new business

We have been addressing the various questions an entrepreneur needs to answer before starting a new business.  This week we get to one of my favorites, how to handle bookkeeping and accounting! I know that most people do not enjoy these tasks, but the invention of accounting software programs has made it much easier for the non-accountants in the world.

QuickBooks is the most popular program out there, but Sage, FreshBooks, Xero and Wave are just a few of the alternatives.  Some can be used on an iPad or mobile phone which is nice for the entrepreneur on the go.  I recommend doing some research as to the functionality of each program to decide which is best for your business.  Some do not work well for inventory or certain types of businesses like restaurants.  Consider whether a desktop version is what you need or if cloud-based is a better choice for you.

Once you have selected the correct program, hire an expert to get you set up and trained.  I cannot tell you how often we are hired to clean up some a QuickBooks file.  We usually find that the problems are not due to sloppiness or a lack of intelligence by the user, but rather a lack of understanding of accounting.  The programs are created to reduce the need for an understanding of debits and credits, but some issues, like inventory and payroll, do require more knowledge at least during set up.  Set up and training is always cheaper than clean up!  You also may need expert advice on the best way to enter the data into your accounting program.  If you have a POS which will track the details of your sales and inventory, you may not need all the detail in your accounting program.  You will need the dollars entered so having an expert guide you through the process will insure that the information is correct but not redundant.  This is very important when time and dollars are limited during the start up phase.

Finally, make sure to select your accounting program and get it set up and running before you open your business.  Many entrepreneurs leave the accounting until a later stage in the start up process because there are so many things to do when opening a business.  This is a mistake as you will not be able to track how your start up is doing if you aren't doing the accounting from day one.  Too many owners find they have wasted money on packaging or office supplies or other unimportant expenses because they were not able to keep a close eye on the totals via the accounting process.

Should you try to save money and do the accounting yourself or should you outsource the task or hire a bookkeeper or accountant to do it?  Be honest with yourself: if you are not going to keep up with it yourself then find someone else to do it.  It really is an important part of running a successful business so starting strong and staying on top of it is crucial.

Thursday, July 9, 2015

Should I have a partner for my small business?

Beth and I are fortunate to have a really great partnership so in my experience, having a partner makes owning a small business much easier.  We have been able to split duties easily and what scares me doesn't scare her and what makes her nervous doesn't bother me.  We have seen other partnerships which have not been successful.

Being a solo entrepreneur can be stressful as all the decisions must be made by the single owner. The positive is that there is no need to compromise: the solo entrepreneur gets to decide exactly how the business should be run.

Take your time to get to know a potential partner.  Have detailed conversations about your business philosophies: how to handle employees, problem customers, borrowing money, raising prices, etc.  Determine how you are going to handle disagreements, especially if you have equal ownership.

One of the most important things you can do to insure a successful partnership is to put together a detailed operating agreement.  We have talked in early articles about the kinds of things you should include in an operating agreement and the best way to put one together.  See  How to create a successful partnership

If you have owned the business by yourself it can be difficult to share the decision making with a partner.  The business is like your child and it can be difficult to let go of full control. Make sure you test out your ability to do so before you sign any legal documents and form any partnerships.

Having a partner can give you additional funds at start up and during tines of expansion.  It gives you additional thoughts on how to solve problems and more hands to get the work done.  Just make sure you pick the right partner so the business and the partnership is a success and not a nightmare.