Its amazing how complicated you can make bookkeeping if you try. Apply for a handful of credit cards, get two or three bank accounts, and carry arround a checkbook … and you’re on your way to a life of late payments and bounced checks.
There’s a better way. In fact, keeping your books straight in a small business should be as simple as “Just Say One.”
So next time you are asked…
- How many bank accounts do you need? ONE. Last time I started a new business account at a bank, the bankers wanted me to have three new accounts: Checking, Savings, and Payroll. Why payroll needs its own account is beyond me. And savings? Forgettaboutit. There is simply no reason why a small business needs a savings account. Take the ONE checking account and leave well-enough alone.
- How many employees should get a debit card? ONE: That’s you. And if you’re smart, you’ll lock it in a drawer and never use it. Debit cards pull cash from your account instantly, and that makes it too difficult to keep track of your balance. Start passing them out to the staff, and you will lose control of your account pretty quickly. That means unknown balances, which leads to bounced checks and much higher fees.
- How many credit card accounts would you like? ONE. Assuming you have any credit at all, Visa, Mastercard and American Express have small business credit cards ready to send you. But each comes with a paper statement, a website, a password, a cash advance password, a credit limit, its own fees and payment date. Take any two, and you’ve got too much to keep track of. So keep your business expenses on ONE credit card so you know when the payment date is and can track everything in one place.
- How many days a week do you write checks? ONE. Instead of paying every vendor immediately, tell them they have to wait. Why? Because you write checks on ONE day a week…or even ONE day each month if you can. When you group your payments like that, you can see exactly how much money you have, how much you need, and who can wait until next time. Bounced checks will be a distant memory when you are able to handle all your bills at once.
- How many people have check writing authority? ONE. Actually, I suggest that you delegate this one thing to someone else. Find a finance consultant or a full-charge bookkeeper to write your checks. But do not delegate check signing authority. Make the bookkeeper bring all the checks back to you for review and signature. Since you’ll be doing checks on just one day a week, this will only take a moment of your time, and you’ll be able to quickly spot duplicates, mistakes, and missing payments.
Too many entrepreneurs run their small businesses like giant enterprises. Sure, IBM and Microsoft have more than one checking account — but they also have armies of accountants. Until you build a finance department of your own, stick to tools that make bookkeeping simple.
And next time a banker or employee tries to make your accounting more complex? There’s really only ONE answer.
Dedicated to Your (Simple) Profits, David
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