In this series, we have talked about several of the characteristics of successful businesses. We discussed: continually researching competition, location, and product/service demand; using capital properly; and education and experience. The next trait of a successful business is their ability to organize. Keeping proper records and financial information is crucial to running a successful business.

Whether you sell products or services, you sell something. Documentation of the sale and the agreements that go along with these sales are critical. What happens if a customer comes after the sale stating, “I was supposed to….”  Do you have the proof and the information necessary to debate or confirm this information? Successful businesses do. Oftentimes, you will find printed on a receipt the stores policies, they have computer systems that track the purchases and they have contracts that require signing before a product or service is delivered.

This is a common topic in small claims court. Customer states they were supposed to receive something or a verbal contract was unfulfilled, business owner states it is not within their policies or that it was not agreed upon, and there is no proof. What about the vice versa situation? Customer does not pay the remaining balance of what is owed to the company and the owner takes the customer to court. Either way, no signed contract or documented policy information, it becomes a “he says” versus “she says” situation. Unless the customer is making an obviously outlandish request, the business owner is oftentimes held responsible, or does not receive money due in these situations. The worst part is that this court case now becomes part of the businesses Dun and Bradstreet reports.

Included in this subject are also accounts receivable and payable transactions. Documenting the money coming into and out of the business is crucial. This takes us back to using capital properly. You cannot use your capital properly if you do not know where it is. There are software programs that are available to help in this process if you do not have a book-keeper, but ramifications of not organizing and recording accounts receivable and payable transactions can lead to customers not paying bills if they are not invoiced in a timely manner and IRS audits if you are not able to prove the business income and deductions.

Business owners that do not have the time, experience, or strengths in this area need to make sure the first person they hire or retain is someone who does have these capabilities in order to ensure their business’ success.

So while you are reviewing this crucial step, we will be documenting and recording the next key to running a successful business.