In theory, a family business should be easier to manage. Working with people you have known and trusted over a number of years has the ability to make your business more tight-knit than many other structures. But many family business owners fall into the trap of becoming more lax with their accounting, because of the false sense of security that dealing with family gives them. Prudent accounting is just as important in a family business.
Keep Tabs on Your Cash Flow
As with any well-run business, you should be keeping a careful eye on both your incomings and outgoings. You can do this in house, with the employment of a member of staff to keep your accounts properly, or even by using one of the many accounting software packages now available on the market. As with every business practice that is of great importance, however, it can be wise to seek professional help in this area, and hiring a specialist accountancy firm can be a sensible solution for ensuring your accounting is in safe hands.
Keep Business and Family Expenses Separate
This sounds like it could be tricky when running a family business, due to the inevitable crossover between family activities and those which are counted as business. But wherever possible, you should aim to maintain a strict dividing line between outlays considered to be part of your business, and those which have no direct link. A family dinner, for example, might be enjoyed with the same people who are members of staff, but does it really count as business expenditure?
This is often the single trickiest part of family business accounting, and is definitely a matter you should consider calling in professionals to handle.
When you are preparing to pass on a business to the next generation, it is essential that a plan is put in place. This plan should be clear, transparent and have been professionally checked. The process of formulating the succession plan should ideally have involved as many relevant stakeholders as possible, and delegating responsibility within the next generation is also a key element of any succession plan. Every family member involved in the business should know what their job is, and what is expected of them.
Communication is Key
Maintaining constant dialogue is a good way to ensure bulletproof accounting for a family business. As a family, you might think you would talk more than a member of a normal business. In reality, the opposite can actually be true.