Accounting System/Internal Controls In Small Business
A new small business will find that it is generating important data necessary to conduct business. For example, suppose you have a mail-order business. Incoming orders must be recorded. The amount of payment must be recorded. Which products are shipped on which shipping dates must also be recorded.
To track such information, most businesses have a database system which has been set up to record key information. Record keeping is essential to successful small business management. Without adequate records, you won't even know how well your business is doing (nor will the IRS, which could cause you other problems!).
In addition to tracking sales and payments, you will want an accounting program for your small business. Try the various programs. See which one you like the best. MYOB (Mind Your Own Business) is one popular accounting program. I also highly recommend taking an accounting class and ordering a copy of Keeping The Books: Basic Record-Keeping and Accounting For The Small Businessby Linda Pinson.
Many small business owners neglect record keeping until the end of the year, when they must file taxes. Then they bring their shoebox, full of receipts and other information, to their accountant with the hope that the accountant will be able to figure it all out!
Getting behind in the record keeping is a serious problem for some. Procrastination kills! Set up a regular schedule for entering accounting and order/fulfillment information into your record-keeping system.
When starting, when in doubt about the need to record some bit of information, go ahead and record it. If you find you really don't need the information later, you can stop recording it. But, if you later find that you need information which you haven't been recording, you might have a difficult time reproducing the information.
As your small business grows, you will find that other information which you were not recording is useful. Allow your record-keeping system to grow and change with your business. Using feedback and experience is one of the best ways to learn what information is most important to your company.
Internal controls will change as you grow your business. For example, when you were a one-person company, whenever you had a business expense, you probably just wrote a check to cover the expense. However, as you have employees, you might find it is useful for them to be able to order materials and equipment. However, you don't just want to hand them your business checking book!
One common solution is the purchase order system. Whenever an employee desires to acquire new materials for the business, he/she fills out a purchase order or gets some approval. This method allows employees to order necessary supplies, but, at the same time, effectively records all purchase transactions, so the business owner knows who is ordering what.
Internal controls make it easier to monitor what is happening within your business and to make any necessary changes. You can't change what you don't know about.
Think about your internal controls, record keeping, and accounting system. These can always be modified latter as your business grows and changes.