Your Financial Flow System™ is your step by step operating procedures for your bookkeeper or accountant. This system allows your bookkeeper or accountant to follow step-by-step and will essentially let them know how you run your business. Writing down and documenting these procedures will highlight for them areas that need improvement and tweaking and areas that are bringing you maximum operating efficiency.
Managing your books regularly does not need to be a complicated task. If you have a simple Financial Flow System™ in place it functions as a step-by-step instruction guide to track your income and expenses. Your system does not have to have a lot of accounting jargon and it can be a simple list that can followed easily every time.
Systems are in every facet of your business, not just in your product or service line. Having a Financial Flow System™ in place in your accounting department will help you see where your business is thriving and where a breakdown might be occurring, so you can take the necessary actions to prevent financial stress or failure.
Let’s take McDonald’s for an example. Each franchise owner follows McDonald’s corporate Financial Flow System to run their specific store location. These operating procedures allow franchise owners to have instructions and procedures to effectively and efficiently run their store. They do not have to reinvent the wheel for every process, but they can follow the steps and easily tweak where needed for their individual location.
Create a System
- Documentation. Write down your entire current process from start to finish. Don’t change the process, just get it all down as is, on paper. Then give the list to your bookkeeper or accountant to review. They will be able to assist you with finding ways to increase optimization in your process.
- Cash is king. Balance and reconcile your cash accounts. If your cash account is not reconciled regularly, you have no way of knowing what’s going on in your business.
- Who owes you and who do you owe? Make sure your balance due to you from customers and the balance due to vendors are up to date and accurate at the end of every month. This is needed in order for you to make accurate cash flow forecasts that will keep your account in the black.
- Adjustments. Make any necessary adjustments needed to ensure all of your balance sheet accounts are accurate. This is important because this statement tells the financial status of your business at any given point in time.
- Look at your reports. Review and analyze your monthly reports to determine if they accurately reflect how your business is operating. If not you may have to make some changes, but at least you will know in advance and not when it’s too late.