Procedures are the Husk on the Cob

While cloud accounting automates the monotony of bookkeeping in a wonderfully efficient way, having a solid grasp on your financial procedures is invaluable to good business.

There are many procedures that require consideration, but one often discussed with clients is how expenses will be allocated.

Differentiate between Cost of goods sold and Expenses:

• A cost of sale or cost of goods sold (COS / COGS) is an item you must purchase to make a sale.
• An expense will occur regardless of a sale transaction occuring.
• Using Xero, a COGS will have a code number starting with a 3 and an expense starting with 4. Using QBO, the account type is identified directly.

Decide how different expenses shall be allocated:

• Will a sub-contractor working in a temporary capacity for your business (such as a consultant who cares for your clients while you take a much-needed break) be allocated as the same expense for an external consultant performing a service for you (such as your trusty bookkeeper)?
• Consider how you will differentiate between such expenses as general expenses, tools, staff amenities This will be helpful to explain reporting quickly to another member within the business and for your own information.

Other procedures to consider and document are:

• Is my cash handling compliant and well documented?
• What are my terms of payment?
• When will I issue warning when a payment is overdue?
• How do I ensure I have a good credit history while keeping my cash flow buoyant?