Running a successful business takes a lot of time and work. One of the keys to running a successful small business is sound accounting and financial management. This is true of a business whether it accepts cash only or deals in large volumes of credit transactions. FindLaw's section on Business Accounting contains how-to guides and tips to help with cash management, maintaining a balance sheet, protecting against employee fraud, the valuation of intangible assets, and other topics related to business accounting. In this section you can also find resources for start-ups and sample financial documents for your small business.
The Importance of Balance Sheets
Balance sheets are an important tool for businesses to organize and keep track of their finances. Generally speaking, a balance sheet lists the assets and liabilities of a business. Assets include current assets, fixed assets, and "other" assets. Current assets include cash that is in hand (including in the business bank account) and accounts receivable, which are funds that customers presently owe the business. Fixed assets are ones that produce revenue but are not intended to be sold. Some examples of fixed assets are building improvements, office furniture, and real property. Businesses must take any depreciation into account when listing the value of fixed assets. Other assets may include fixed assets that are intangible, such as patents, copyrights, or key employees.
The liabilities of a business are basically the business's debts. It's best to arrange liabilities in the order of when they must be repaid. Typically a business has current liabilities and long-term liabilities. Current liabilities include any debts that must be paid within a year. Examples of such liabilities include employees' wages, rent, and taxes. Long-term liabilities, on the other hand, are debts that will be paid more than one year from the date the balance sheet is created/updated. A mortgage or repayment of funds received for starting up the business are examples of a business's long-term liabilities.
Warning Signs of Embezzlement
Embezzlement occurs when an employee steals money from the business where he or she is employed. Not only is it an unfortunate situation for a business owner, it's also a crime. Hopefully, you will never have to deal with an employee embezzling funds from your business, but it's a good idea to keep an eye out for certain warning signs that could indicate that an employee is committing embezzlement. While there are several signs that could indicate embezzlement, a few common signs include:
- Duplicate payments
- Unusual drop in profits
- Missing documents
- Missing petty cash
Of course, figuring out if embezzlement is occurring at a business requires an owner to look at a totality of circumstances. For example, although an employee suddenly living in a way that may not be supported by his or her salary could indicate embezzlement, it might be that the employee's spouse has received a substantial raise or that the employee received an inheritance. It's important not jump to any conclusions without fully investigating the situation.
Hiring an Attorney
If you have questions about business accounting, or would like guidance on any aspect of running a small business, it's best to contact a business and commercial attorney near you.