Small Business Accounting Tips
As a small business owner, you understand the importance of accurate financing and proactive financial professionals. When your business was new, you may have handled some of these and other administrative tasks, including human resources, sales and marketing, yourself. However, as your company grows, you need an accounting strategy that will grow with you. These are a few tips.
Create and Stick to a Budget
Calculate your daily, weekly and monthly expenses. You need to understand your immediate obligations in addition to your monthly payments. You can pad your accounts a bit by overestimating your expenses when you create your budget. Just be sure you create one for this week and future weeks.
You should also track your sales process and calculate your monthly profits. You need to make sure that your profits will cover your budgeted expenses. Therefore, what is the least amount of profit you could and need to earn each week to cover your expenses? This should reflect your budgetary needs. Then, build strategies that ensure that you meet this minimum profit.
Separate Your Accounts
Separate your income from your debts, income and expenses. You should keep careful records, and you need to separate your incoming and outgoing monies in your accounting. Avoid allowing your loans, which you use for startup costs, marketing and other initial outlays, from becoming income. You need to pay your loans back, so they should remain in your liabilities column.
Implement a Collections Policy and Process
Companies lose money when they fail to collect past-due amounts from their clients. When your customers do not pay their bills, you cannot pay yours. You may feel uncomfortable pursuing collections, but you need the money for your company.
Therefore, you should implement a collections process. You likely have your customers sign contracts concerning when they pay for their products and any discounts you offer for early payments. Hold them to it. Send reminder notices when their due dates get close. Contact them if they miss their payments. Implement penalties if they do not pay their debts on time.
Make sure you state everything in your client’s contracts and follow through. You should also consider using software tools to improve your billing process and invoices.
Choose Software or a Professional
Early in your corporate finance process, you should decide what software you plan to use. Choose a package that can grow with your company. Choose whether you will hire a bookkeeper or accountant or fill out your software yourself. Fortunately, someone trained in finance has a greater understanding of the nuances of corporate finance.
Your company’s financial solvency and stability depend on effective accounting. Therefore, consider these tips for your small business.