Here are tips to help with the bookkeeping process:

Profitability

By keeping up with your bookkeeping, you can keep a much better gauge on profitability. Remember these tips:

à        Since payroll is a key component of every business' profitability, include payroll and related expenses such as payroll taxes in every job.

à        Learn to produce reports such as "profit and loss," "accounts receivable," and "accounts payable." Study these on a monthly basis at a minimum. If you don't know how to read them, get help from someone who does-your bookkeeper, your accountant or a friend familiar with your software.

à        Budget at least one year in advance by month and then compare the actual to the budget on a monthly basis. Also, compare the current month to the same month a year ago. See where you're over or under budget and take steps to maximize this bottom line accordingly. Once the current month is over, budget for the same month next year so that you always have a 12-month budget. You should change the budget whenever facts come to light that weren't included in your original budget.

Check and Double Check

Pay attention to the bookkeeping. If there are errors, glitches or even fraud, it's much easier to correct it now rather than later when memories begin to fail.

à        Have your bookkeeper check all vendor statements against what your books show as due. Count petty cash personally on an occasional basis. Why? To make sure that the total of vouchers and cash equals what your petty cash fund should be.

à        You don't have to be a bookkeeper to monitor whether yours is performing efficiently or not. Determine whether like items on your detailed profit and loss statement are always in the same category. Examine your miscellaneous account to see whether those items belong in other places. Make sure that your accounts receivable, accounts payable and bank reconciliations are up to date.

à        Examine the backs of your checks periodically after they've cleared your bank. Make sure that the endorsement agrees with the payee.

à        Examine the monthly bank statement and bank reconciliation. Make sure you recognize every payee.

à        Make sure payroll tax liabilities are deposited timely. As the business owner, you are ultimately responsible for payment of this liability.

Customer Service

Creating specific policies and procedures with customers, makes the collections process much easier and more efficient.

à        Deposit checks from customers no later than the day after receipt.

à        Send statements to all customers, with open balances on the first day of every month dated the last day of the previous month. This isn't just a collection device, but also lets customers know that you're on top of things.

à        Initiate a credit policy for past due accounts. This is so you don't continue servicing customers on account who are past due beyond a certain point. Depending on the type of business you're in, this should probably be done in days past due.

à        Check your accounts receivable periodically for past due balances. Make sure that collection is being pursued with phone calls and letters. Prepare 30-, 60- and 90-day collection letters before you need them. Then they'll be ready to send out as needed.

Get – and Stay Involved.

As the owner of the business, you should make it a point to stay involved with the bookkeeping.

à        If you allow your bookkeeper to make "adjusting journal entries," initial the adjustment before allowing the entry. Make sure you know what the adjustment is for.

à        If you maintain inventory, you should personally supervise the taking of any physical inventory.

à        Meet everyone listed on your payroll. One way to do this is to personally give out the paychecks on a sporadic basis.

à        Who signs your checks? The answer should be YOU! As the owner of a business, you should always be the one to sign checks. Be sure you look for attached back-up documents and a date on the check. If you don't know what you are signing for, then don't sign the check.

You've gone into business because you like what you're doing and you're good at it. Maintaining accurate books and records is a necessary part of any business not just for taxing authorities but to allow you to make timely changes, when necessary, based on hard facts. Keeping your eyes and ears focused on your bookkeeping activities will keep your profitability up, your losses down and the pathways to fraud and error clamped shut.

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Dee Manchester is the CFO of O'Sullivan Creel, LLP as well as a manager in the Small Business Solutions division. Dee is a QuickBooks ProAdvisor and oversees QuickBooks software setups and conversions.  She consults with small businesses regarding accounting procedures, payroll, payroll tax and tax issues.