When running a small business, you have to make sure you stay focused on accounting. If you don’t manage debt, receivables, and marketing expenses accurately, your company will sink before it grows.
You can save your company by implementing simple bookkeeping strategies. Here are five accounting tips to help grow your business.
1. Decide on using a bookkeeper or accounting software.
Though entrepreneurs might feel ready to act as head of accounting, sales, and marketing at the same time to cut costs, it may help to hire a bookkeeper just to make sure you aren’t racking up the errors. It can help you to know someone with experience and deeper understanding is working on your books. To start, you can hire someone part-time or as a freelancer, so you’re not paying a full time wage for these services. As an alternative, the U.S. Small Business Administration offers help with managing expenses on your own, or use one of the best accounting programs which will lets you crunch the numbers yourself.
2. Keep accounts receivable payments separate from borrowed funds.
Small business owners need financial backing and/or loans for startup capital, marketing campaigns, and other initial things in the early days. To make sure the loans don’t appear in the receivables, use software that separates income from borrowed funds. Don’t lose sight of what is yours and what needs paying back.
3. Don’t allow clients to get away with not paying balances.
Seeing a large amount in the receivables column is a good thing, but the money doesn’t really count until it is in your bank account. Don’t let clients avoid regular payments. Stand firm and insist you receive payment for past orders before letting them have more materials or services. The receivables department is crucial in keeping your company afloat. It may make sense to improve your invoices or to update your billing and invoicing software.
4. Detail daily expenses so you can budget for the coming weeks.
It’s a good idea for business owners to keep records of everyday expenses they incur in the company. Instead of calculating expenses every two weeks for payroll purposes, focus on every day or every week. This can help you have a better idea of where finances are each week and how much money you’ll need to budget for in the upcoming weeks.
5. Calculate a minimum monthly profit.
When planning how much it takes to keep a small business running, the numbers can get complicated. Devise an accurate system of expenses and regular obligations so you know exactly the minimum income you need every month. Because income can be the easiest to calculate, make a strict target you’ll need to earn. Without that exactitude, accounting becomes confusing and your business can suffer.
Accounting is as important your first week in business as it is during tax filing time. Use these five accounting tips to keep your business’s finances healthy and stable every day of operation.