From day one, small businesses should create a good system of bookkeeping and accounting. It is critical to the financial well-being of any good business. Here are a few tips for small businesses.
1. Keep bookkeeping current and accurate. Good record keeping is vital. Many start-ups, as well as existing business owners tend to neglect this aspect of their business until the end of financial year is upon them. Allocate time each week and devote to your books. Regular reviews will let you know how your business is going and allow you to control your cash flow.
2. Keep accounts receivable payments and borrowed funds separated.
Small business owners often need financial backing or loans for startup capital, marketing campaigns, and other initial expenses. 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. Be sure you have a good collections policy.
While a large number in the receivables column is a good thing, the money doesn’t really count until it is in your bank account. Be sure your clients make their regular payments. Insist you receive payment for past orders before letting them have more materials or services, or set up pre-payment and/or credit card payment options. The receivables department is crucial in keeping your company afloat.
4. Detail daily expenses for a solid budget.
Business owners should keep good records of everyday expenses the company incurs. Rather than calculating expenses every two weeks, focus on every day or every week. This will help better understand where finances are each week and how much money you’ll need to budget for in the upcoming weeks.
5. Know your minimum monthly profit.
Sometimes, knowing how much it takes to keep a company up and running can be complicated. Create an accurate system of expenses and regular financial obligations so you know minimum amount of income you need every month. This will not only keep you focused on your financial goals, but your marketing goals as well.
If you have other questions about accounting for small business, feel free to contact Jones and Company CPAs, P.A. at 727-845-4166 or online at www.jonescpas.com.