Keeping your business finances in order is as easy as IOU
30/06/2017 by Ean Brown Partners Limited
Part 11 of our blog article series: "Strategies for business success"
As a small business owner, your time is often tied up with managing daily operations and work-flow, keeping your customers and staff happy, and looking for opportunities to grow your business. 'Finances' is that dreaded F-word that you would prefer to ignore rather than tackle head on.
But it doesn't have to be that difficult, as long as you stay IOU - Informed, Organised and Up-to-date:
Regular financial reviews
Reviewing your financial statements only at year-end exposes you to the risk of identifying problems too late. In order to keep your finger on the pulse and stay one step ahead, plan to set aside some time each month to review your balance sheet, profit and loss, and cash flow statements (read our blog post on tips to deciphering your financial statements).
These regular evaluations will give you invaluable insights into your business performance, provide critical data for projecting future revenue, cash flow and expenses, as well as early detection of issues in order to implement pre-emptive measures. Being aware of your financial position each month allows you to plan for business expansion and guide your business strategy.
Bring a professional on board
Accountants and bookkeepers are your trusted allies when it comes to sound advice and business expertise. Their comprehensive knowledge and access to resources can help your business:
become more efficient
identify opportunities for growth
isolate and manage risks
stay compliant with tax laws and Inland Revenue
It may seem tempting to do it yourself for the sake of saving some money, however an accountant's technical proficiency in minimising your tax bill and keeping you penalty free will almost always outweigh any cost savings you make from going it alone.
It's been said that knowledge is power, and for good reason. Making the decision to learn about financial management means you are better equipped to plan your business strategy and future direction. If you understand what the figures on your financial statements mean for your business, you are arming yourself with the confidence to negotiate contracts and business agreements, and deal with banks and financial lending institutions.
Basic accounting courses are often available as correspondence or online courses, or evening classes at local learning institutes. Conduct your research to find a course provider and mode of delivery that suits your needs.
Move to the cloud
Cloud-based financial systems offer several advantages, including integration with other systems, allowing fast retrieval of up-to-date data across many platforms. They have efficient expense tracking that improves accuracy, and can deliver automation of daily financial processes to enable you to use the time-savings elsewhere.
Above all, cloud-based systems boast the unrivalled advantage of access to your information anywhere, anytime, from any device, and access to data can be easily shared with your team members and bookkeeper or accountant.
Keep business and personal transactions separate
It may seem tempting to whip out a business credit-card to pay for a personal expense (or vice versa) because it's the first card to hand when you reach into your wallet, but the messy transaction trail this leaves behind in your statements will far outweigh any immediate convenience.
Your statements will look far neater and be easier to follow if you don't have to perform correcting account transfers, so avoid these altogether by being vigilant about keeping business and personal expenses separate.
Keep good records AND reduce your accounting fees
One reason people are sometimes reluctant to engage the services of an accountant or bookkeeper is the expected costs involved. However as accountants are time-based service-providers, it makes sense that you can reduce your accounting fees simply by presenting timely and well-organised documentation. In addition to fully utilising the features of your accounting software and maintaining good communication with your accountant throughout the year, you can reduce the amount of time your tax agent spends sorting through jumbled paperwork, querying transactions and making requests for missing documents and information.
Tomorrow (noun) - A mystical land where 99% of all human productivity, motivation and achievement is stored.
When you are already busy with the day-to-day running of your business, dealing with your finances as well can seem daunting. There will always be something else more urgent which gives you the excuse to put off sitting down to your paperwork, however the undue stress you create for yourself long-term will invariably overshadow that fleeting feeling of relief.
Scheduling (and sticking to!) daily or weekly time slots for catching up on paperwork will actually reduce your stress, keep your staff, customers and accountant happy, as well keeping the money flowing in when you stay on top of your invoicing – which leads on to the next tip ...
Make sure you get paid!
This might seem like stating the obvious, but people are in business to make money, yet a surprising number of business owners do not properly keep track of their debtors – failure to invoice jobs and accurately track payments mean money is slipping through the cracks, threatening your business's viability and success.
Prioritise time, at least once a week, to generate and send out invoices for work completed, allocate debtor payments received, and chase up overdue invoices. Good debtor procedures ensure your business's billable time is being properly remunerated, and staying on top of your accounts receivable means you get a firm handle on who your good and bad payers are, and reduces the risk of bad debts and write-off's.
In closing ...
No matter what industry you're in, finances are part of the deal when running a small business; good financial management is the positive contribution you can make to secure the viability of your business model and ensure success and prosperity for the future.