Regardless of the size of your business, accounting is a crucial task you can’t afford to take lightly. Small business owners tend to put this among low priority features mostly because they are trying to juggle many tasks at the same time. However, analysing all financial records and interpreting them is the key to a successful business.
Apart from keeping yourself updated on your financial strength, it also alerts you to potential gaps. As such, you can prevent mistakes from happening or take advantage of new strategies. It can be a tedious task to keep track of your records, especially if you are the only one doing everything. The benefits of doing so are worth the time, not to mention how significant the repercussions can be if you choose not to do it.
Are you ready to start prioritising your business accounting? It is essential to employ the right strategies, to help you we have compiled a list of some useful tips from accounting experts.
Closely Monitor The Cash Inflow
Whether you are starting from scratch or acquiring a small business from another owner, the receivables will always be among the most crucial factors. It is exhilarating when the customer pays for the goods or services you have offered. However, if you don’t take a keen interest in these records, you might end up being frustrated.
So, how do you manage your cash inflow? Whenever you issue an invoice after service delivery, it means you are expecting a payment from the customer. Once paid, make sure you update your list of those you owe. You might be doing this already, but as the orders keep coming, it becomes challenging to keep up. To make your task a lot easier, you can look for either a premium or free software designed for accounting.
Some may opt to update their listings after all transactions of that month have been done. Well, this can be costly when it comes to taxes; needless to say, you’ll find yourself wasting a lot of time. The best solution is to keep track of all transactions in real-time. As such, all you’ll need to do at the end of the month is to balance your sheets and not to start updating the invoices.
Pay Attention To Cash Outflow
Tracking all the expenses in your business should be a top priority. Cash outflow means all the cash that goes out of business, whether to pay the workers, buy equipment, settle debts, or recurring bills. This calculation will come in handy when paying your taxes.
By recording all the expenses, it becomes a lot easier to analyse your annual profits. Remember to keep receipts of cash transactions. Most entrepreneurs fail to factor this in their calculations, and that could have severe repercussions on the business.
Produce Cash Flow Statements Regularly
The best way to analyse your productivity is by keeping financial records safe. Consider producing weekly or monthly cash flow statements. In business accounting, the most important thing is to understand the numbers in front of you. Having all the statements ready will help you analyse cash flow and know where you need to change or improve. These help in the allocation of your income as you anticipate various future expenses.
But, it is not only the cash flow reports alone that you need to produce. Balance sheet and income statements also need to be readily available for analysis. A balance sheet will show where your business stands at a given time in terms of assets, equity, and liabilities. The best way to monitor financial health is by preparing these statements on a monthly or quarterly basis. These could also help when negotiating with investors who might be interested in your projects.
Differentiate Invoices From Receipts
It seems like a straightforward knowledge, but some business owners fail to differentiate the two. An invoice is like a list of bills sent to the customer after service delivery. It is more like a reminder that they owe you money. A receipt, on the other hand, is a detailed proof of a given transaction.
When dealing with your customers, receipts will come after all the bills in the invoice have been settled. Mixing the two could end up giving you inaccurate figures. In fact, many businesses have fallen into losses due to this avoidable mistake. The most common issue is when you think a customer has already settled their bills when, in fact, they haven’t. So, to ensure that your accounting doesn’t become a nightmare, learn to separate invoices from receipts.
Do Not Combine Personal And Business Accounts
It is a common practice by small business owners to use their private accounts for business purposes. Well, this could end up messing up with your financial books. Learning to separate personal and business accounts is one accounting tip that will help you in the long run. Also, draw a line between your assets and business resources.
Employ A Professional To Handle Accounting Tasks
Business accounting is a very crucial part of your company, but you don’t have to do everything by yourself. The good news is that you can employ someone experienced in that field to help you out. Of course, having an accountant to handle these tasks can be very significant. Their expertise can save you a lot of money down the line. As an entrepreneur, there are a lot of tasks to accomplish, and that could hinder you from effectively doing your taxes.
In summary
If you are just starting your entrepreneurship journey, there are bound to be mistakes along the way. To avoid these nightmares, you can begin by strengthening your accounting department. Regardless of how big your business is, you should prioritise accounting as it determines your financial growth. One way to ensure that you are doing the right thing is by monitoring the cash flow. Couple this idea with the rest of the tips shared in this article, and you’ll be good to go.
Developing the capabilities of yourself, and your workforce is a great way to ensure you have the in-house abilities you need to succeed. Outsourcing specialist responsibilities, such as accounting, provides you with the time and opportunity to really focus on the other area’s of your business that will help you grow and achieve your strategic objectives. The IoSCM Business Support team work with hundred’s of organisations from across the supply chain and beyond, to understand the skills of employees, teams, or functions within a business, and highlight area’s for development inline with the aims of the company. Whether you want to enhance the knowledge of one employee or your entire team we can help. Why not access our FREE support today? Email corporateteam@ioscm.com or Call 0800 1422 522 Select option 3.