Originally published in The Frederick News Post


Many small business owners use software to maintain their checkbook balance. However, that “cash in the bank” balance is only one measure of the results of a business, and by adding some simple additional steps to the cash maintenance process, the small business owner can have much more information at their disposal.

While many businesses record their cash transactions, fewer actually reconcile their cash balances to the balances on record with their bank. Though there are a few transactions that need to be recorded that do not affect cash, the vast majority of transactions, and therefore the majority of financial activity, involve the inflow or outflow of cash. As a result, reconciling the cash balance with the bank balance will provide accuracy in financial reporting.

Many small business owners have an independent process for invoicing their customers for goods and services, external to their accounting software. This additional process can create duplicate work for the owner or their staff. When billing is generated with the accounting software, the business owner can track the age and anticipated collection of cash within a single software package, making the process of collecting accounts more efficient. The business may need to adjust the billing process in order to work within the software. If the features of the billing system can be reconciled with the requirements of the billing process, the resulting streamlined receivables management system is worth the effort involved.

On the other side of the balance sheet, there is an opportunity to record current and future vendor payable obligations. Unlike keeping a checkbook balance, where the cash balance is known but the future cash inflows and outflows are unknown, the entry of expense invoices, with their related due dates, allows the owner to anticipate cash outflows and track future cash obligations.

Finally, the most overlooked benefit of maintaining an accurate bookkeeping system is to track operating results. The success of a small business is dependent upon the owner being able to compare actual results to anticipated results and actual results to prior period results. Without creating monthly financial statements, these comparisons are not being made, and the owner is not fully informed. The implementation of cash reconciliation, integrated billing and receivables and accurate recording of expenses will make the basic financial statements more representative of the company’s results.

All businesses face the daily pressure of having too much to do in too little time. However, it is the responsibility of the business owner to keep the organization moving forward. The best way to do that is to focus on action items that create a large rate of return for the time invested. Implementing a cash reconciliation process, using the billing, collection and payable features, and establishing a system of financial reporting will allow the business owner to develop information on profitability and efficiency for a relatively small amount of investment in their time and their money.

Kimberly S. Chaney is the owner of Kimberly S. Chaney, CPA LLC, a Frederick accounting firm focused exclusively on consulting with small businesses. She serves as a SCORE volunteer with the Frederick chapter.

SCORE is a nationwide volunteer network of 330 chapters dedicated to the formation, growth and success of small businesses. SCORE Frederick provides free and confidential business advice and mentoring to start-up businesses and to established small businesses. SCORE Frederick also offers workshops for both startups and established businesses.