Accounting is a lot more than just bookkeeping. Sure, the numbers have to balance but there are also many additional tasks that fall under the category of accounting. The size of your business does not matter nor does the amount of revenue it generates. An effective business accounting department has a firm grip on the day-to-day expenses and revenues as well as monthly forecasts and projections that extend beyond that timeframe.
Without a clear picture of the revenue and expenses of your business, you don’t really have a clue about how financially healthy it is…or isn’t. Believe it or not, when you don’t have an answer to the question, “How is your business doing?” you may be on your way to a large problem developing right under your nose. But there are ways to keep your business from suffering losses when it should be recording gains. Here are five ways to manage your business accounting like a pro.
1. Maintain A Cash Reserve
A contingency plan is a smart thing to have in any size business. Cash reserves come in handy in several ways and are effective in keeping the cash flow moving within your company – especially when seasonal dips in revenues occur. The general rule of thumb is to have enough extra cash stowed away in reserves to cover between three and six months of operating expenses.
You can do this by putting a portion of each month’s income into cash reserves to hold until you need them. It is also wise to monitor reserves quarterly to confirm there is enough available should a downturn take place and last longer than expected.
2. Don’t Ignore Multiple Financing Options
If you planned correctly, your startup should be able to hold its own before too long. Once it does, your business plan would likely support it in maintaining stability as long as possible. However, there are times when cash reserves run dry and you may have to turn to other sources to provide financing to keep your business afloat until things get better.
You also don’t want to miss an opportunity when funding from another source becomes available. These can range from angel investors, fundraising efforts and traditional places like lending institutions. Planning ahead for such assistance is also crucial as some forms can take months to be accepted.
3. Incorporate Accounting Software
Probably one of the smartest ways to take control of your business accounting is with the use of accounting software. This includes payment options that go far beyond paper checks and are internet-based. These payment platforms are secure and direct which speed up the pay process and gives your clients and customers options that may be easier for them to use. Plus, with accounting software programs, you can generate reports of all kinds for multiple reasons with ease. The ability to track and record cash flow with new technology brings a professional element to your business and also gives it the additional data required for decision making processes.
4. Delegate Accounting Somewhere Else
There is a fact that some small business owners don’t realize until well into the process of running their busy. Not all of us are good with numbers. What this means is that as great a manager you may be and as efficient you have made your business and all aspects related to it, if your financial affairs have suffered as a result, you may need to make a change. In this case, when time spent on keeping your business operating well has taken away from time that could have been spent crunching the numbers, you may soon have a problem.
However, there is a simple solution. You can out-source the accounting duties to someone, somewhere else. In fact, it is quite common for small and medium sized businesses to have their books handled remotely. In other words, by a sub-contractor who works from home most of the time.
5. Offer Rewards and Incentives
You’ve seen these and have probably even responded to a few. Some businesses improve their cash flow by offering customers a bonus of some kind. They come in many different forms such as a flat rate or percentage discount for payment in full by a certain date. Surprisingly, outstanding accounts can be reduced by offering something that gives your clients a break financially. Other deals that inspire additional spending come from discounts used as incentives to attract new customers or additional spending at slower times of the year.
You’ve heard of Black Friday and Boxing Day sales, right? These are two well-known incentive programs. When you use something like this to increase revenues in your business, it gives you more control over inventory as you should be moving some of it. Plus, your revenues will take a spike allowing you to build a cash reserve for when you need it most.
Business accounting is a vast collection of activities that involve the financial wellbeing of your business. Without it, there is no way of knowing whether or not your business is healthy nor can you determine the actual worth of it. With the proper business accounting tools in place, you will have access to all forms of data that can give you snapshots of what your business has been doing and what it can be doing based on actual figures. It is with this data you can make effective decisions related to your business. None of this would be possible without controlling and monitoring the bookkeeping parts of your business. The most important part of this is that every business, regardless of size, age, industry and income can benefit from having effective accounting processes in place. Fortunately, the tools exist and are readily available to assist all business owners. These tools are also affordable and give your financial accounting a professional touch.