Your Daily Life

Let’s take a closer look at your daily routine.

• Upon arriving at work, you quickly checked your emails and sales channels for incoming orders. You also reviewed your voicemail to confirm the acceptance of previous quotes. Additionally, you retrieved mail containing vendor bills and customer payments.
• Next, you checked your online bank balance and were delighted to see the long-awaited deposit. You then prepared checks and ordered additional inventory. Feeling confident, you visited the local Apple store and placed an order for the new MacBook Air. Since it was Friday, you also handled payroll, processed paychecks, and deposited taxes at the bank. Afterward, you took a well-deserved lunch break.
• Upon returning to the office, you were greeted with a stack of phone messages. One message was from your primary supplier, offering a one-day sale. Another message was from your newest customer, requesting part exchanges and a new order.
• Finally, your cell phone rang, it was a new client with a substantial order inquiring about credit card acceptance.

Does this sequence sound like a typical day in your business?

As a small business entrepreneur, it probably does. You’re likely to encounter similar tasks every day. Regardless of your approach to managing these transactions, it’s important to recognize that accounting encompasses a wide range of responsibilities, including taking orders, purchasing inventory, selling parts, purchasing computers, making deposits, processing paychecks, remitting payroll taxes, paying yourself, and more. The meticulous recording and tracking of these transactions, as well as the generation of relevant reports, play a crucial role in your financial success.

To begin, let’s delve into the significance of accounting in your daily life. Every transaction you make leaves an entry in your “books.” Whether it’s a cash receipt, a sale, a check you’ve written, or a deposit from a customer, every transaction gets recorded at some point. The timeliness and accuracy of recording transactions directly impact your business. Accurate and timely data entry equates to accurate and timely reports and financial statements.

If you believe your business is “checkbook-centric,” it’s crucial to recognize that numerous transactions don’t involve cash.

• Any action that affects your assets (such as depreciation or amortization) requires a transaction.
• Any action that affects your liabilities (such as sales taxes or payroll taxes) requires a transaction.
• Any action that affects your sales (such as an invoice or product return) affects your receivables.
• And your vendor bills (expenses) are recorded when received and recorded as payables.

Just because cash isn’t exchanged doesn’t mean there aren’t entries to record.

For instance, let’s consider selling items or services on credit. In this scenario, you record the sales when your invoice is issued, creating a receivable, and then record the cash receipt when your customer pays you.

Ultimately, everyone’s workday may vary, but what remains consistent is how much easier your accounting will be if you handle transactions as they come in, providing you with quick access to your business’s health through a complete set of financial reports.