Dangers of Poor Bookkeeping



The Bookkeeping Options you have
You have a number of options.

These are:

  1. You can keep the books yourself without help from an accountant or anyone else.

  2. You can engage the services of a bookkeeper (rather than an accountant) either fulltime or part time to ensure that your system of recording system is working.

  3. You can engage a bookkeeper to set up your books and monitor how things are going.

  4. You can set up a system which is a hybrid in that you maintain the day to day records and supply the accountant with the day to day reports, summaries and reconciliations that enable financial statements to be completed.

Your options will be dependant on whether you have bookkeeping ability or knowledge and whether you have the time to set up and maintain a system. Most people arrange for their accountant to put in an adequate system initially and then this is maintained by them. The accountant only comes in at the final stages and finalises preparation work before completing financial statements.


What your Bookkeeping System should give you
A good bookkeeping system should provide the following information that will help you in operating and growing your business.

Each Day

  1. Balance of the cash you have in your bank account.
  2. Balance of cash you have on hand.
  3. A daily summary of all your sales and income received.
  4. A daily summary of all your expenses and monies paid out .
  5. Other daily matters that require attention.

Each Week

  1. Details of people that owe you money for sales made to them on credit (accounts receivable).
  2. Details of people you owe money to for purchases made on credit (accounts payable).
  3. Details of your staff and payroll.
  4. Details of the taxes due by your business and the Fed Income Tax and Sales Tax due to the IRS.

Each Month

  1. Details of information extracted from your bookkeeping system so that monthly financial reports and accounts can be prepared by your accountant.
  2. Reconcile your bank account by doing a full Bank Reconciliation.
  3. Balance your petty cash.
  4. Review various positions of the business especially as regards its accounts receivable to ensure that debt collection is not slow and that bad debts do not arise.