SMEs: monthly business management makes for easy year-end

As we approach the end of the financial year, the calls to our support centre are starting to increase and the atmosphere of mass-panic in trying to close this year's books can be clearly felt. It's at this time every year that I wonder why business owners and managers often overlook the day-to-day administrative requirements that result in this major managerial load at the end of February.

It seems apparent that the monthly book keeping and accounting obligations of small businesses lags, resulting in a last-minute dash when, for example, VAT returns are due. No wonder SMEs constantly refer to their administration as a burden.

Sure, I understand that turning a profit is essential and admin ranks very low on the list of priorities. But I do ask myself, isn't it easier to take one day a month to send your invoices, pay your creditors, do a bank recon and close that month's books, than sit with a confusing pile of paper once a year?

Particularly when any mistakes made in wrapping up the financial year can come at a cost; whether as taxes, penalties or even a tarnished reputation.

What surprises me about this sluggish approach to accounts management is the fact that timeous record keeping allows both business owners and managers to stay informed on the current state of their business. In today's competitive knowledge-based economy, a detailed understanding of one's accounts can provide valuable information to support the decision-making process. The ability to analyse the state of a business and understand its strengths and challenges can provide that much-needed competitive edge.

Of course having the right business systems go a long way in making these jobs easier. Because software automates most processes, your year-end can be completed by simply pushing a button. Of course, this means that your basic monthly information has to be recorded correctly and kept up to date.

And if you haven't kept good records, or found that your current system is confusing and difficult to operate, now is the time to reassess your processes and consider buying a professional accounting program.

Please don't get me wrong, I am not saying that all SMEs are admin offenders or that bad book keeping hinders growth. But I am saying to business owners that although your house is small, it should still be kept in order. So, as you prepare to embark on the new financial year, do so with the right accounting software, it could be the best investment you make all year.

* Work to a system and do one job at a time, finishing it completely before moving on to the next.
* Back up all of your files, it's important to keep a record of all transactions before you make any adjustments. It's a good idea to keep that back up off site the minimise any potential loss of data from fire, theft or even human error. Pastel Iron is a cost-effective online data backup service for SMEs (www.pastelirontree.co.za).
* Print out your most important reports like trial balance, balance sheet, income statement, detailed ledger and all age analysis reports before and after running year-end to ensure that the process has been successful. It's also useful to keep these reports as supporting evidence for the auditor.
* Work through all account balances to ensure that they are correct - you can also write off bad debts as you go. This is where having a system is so important; work alphabetically or from smallest to largest account to ensure that none are missed or duplicated.
* Do a stock take to ensure that the theoretical count (stock count on the system) is the same as the physical count (the manual process of counting the stock items on hand). Should there be differences, you need to make the necessary adjustments to reflect the quantities as you capture them.