As a small business owner, your priority is to run a profitable business – create products or render services, generate sales and revenues, and keep your customers happy.
Let’s face it, SMB owners would much prefer focusing their energies on growing and expanding their companies rather than dealing with invoices, receipts, bank reconciliations, credit card processing, tax deadlines or finance related paperwork.
Good accounting processes help streamline your record keeping, prevent errors, make quick amendments, and develop effective workflows. You can check customer and vendor details, create accurate financial reports, track cash flow, and maintain essential tax and payroll records.
Why should small businesses track essential numbers?
As a small business, the only way to find more about sources of revenue, avenues of expenditure, profit or loss, and cash & non-liquid funds is to track your numbers. An effective accounting road-map helps you spot inevitable bumps and prepare for them. Good accounting software and reliable bookkeepers help you stay on top the game.
There are many ways in which you can optimize the accounting process of your small business.
- Strengthen invoicing/payment system –
Your revenue, cash flow, and profits are dependent on an efficient and integrated invoicing process. Your billing and payment methods are largely based on products or services that you offer or on your vendor’s system. A robust electronic system handles the complexities of billing, including accounts receivable and payable. This prevents overcharging or undercharging clients and customers. You can avoid interest charges or penalties associated with late payment to vendors and suppliers.
- Avoid inefficiencies in financial close –
Disjointed accounting systems can result in time-consuming reconciliations, especially bank accounts. When you use different recording systems or spreadsheets, tracking your transactions, checking your tax remits and credit repayments, and maintaining an audit trail becomes difficult at the year end. Automating the accounting system helps you remove inefficiencies in the close process.
- Separate business and personal expenses –
To bring clarity and accuracy in recordkeeping, avoid paying personal expenses from business funds. This could create problems when you seek tax exemptions or write offs. Depending on the size of your business, maintain separate bank accounts for certain recurring transactions like salaries, building rent and lease, or business loans and credits. Ensures that funds are used for relevant expenses. Companies with 20 or more employees should provide corporate credit cards to employees for business-related expenses. You can maintain proper records of expenses and employee reimbursements.
- Monitor cash flow and outstanding payment –
Keep an eye on your cash balance and monitor cash flow. Your business may be recording profits, but you may run out of cash or lack other liquid funds. If your business is constantly strapped for cash, analyze existing payment and receivable methods and make suitable changes. As a supplier or seller, use discounts to force customers to pay early or on time. Delay payment of expense bills as long as possible, when there is no implicit benefit for settling dues early. Make prompt payments when your vendor offers trade discounts. This can help reduce your production or purchase costs.
- Seek professional help –
Hire the right kind of people to help you with bookkeeping. Use the services of professional accountants to comply with tax and legal requirements. Their expertise is useful in analyzing company performance, preparing financial statements, maintaining accurate records, and handling unexpected financial or tax issues.
- Make data backups and update your software –
Every business should focus on securing and preserving accounting and financial data. Make data backups a priority when you use in-house accounting software. If you prefer cloud accounting, choose a system and a provider that offer secure storage and transmission of data.
Good, dependable accounting software helps small businesses optimize their accounting processes. This inevitably empowers your business to remain efficient, improve or retain control over critical processes, overcome setbacks and ultimately, grow your business.