Five Tips for Small Business Finances
Running your own business can be quiet stressful without the added pressure of having to worry about the finances of the business. Data entry, reporting, tax obligations and debtor issues can cause major headaches for small business owners and can have dire consequences if not given the proper amount of attention. At Progressive Accounting Solutions we understand how difficult it can be running your own business and have compiled this blog to help assist small business owners in better managing there accounts.
Make time to work on your accounts
It is not uncommon for the finance function of small businesses to be forgotten about during day-to-day operations. Owners are often more concerned with running the business, generating leads and building a brand. However by dedicating an allotted amount of time each week (say half an hour) solely to the finances of the business, owners can gain an insight into how the business is tracking, allowing them to make more informed decisions going forward. In addition regular work on the finances of the business can help in identifying damaging trends within the business (i.e. underperforming areas, unpaid debts etc.) immediately rather than waiting until months down the track. It is also easier to remember transactions when you are entering them at regular intervals as opposed to truing to complete data entry at the end of the month/quarter.
Budget
Budgeting is one of the most underestimated and underused finances tools when it comes to small businesses. When properly constructed budgets allow owners and stakeholders to identify the areas of the business that are exceeding what was initially planned for as well as areas of the business that need improvement. By regularly comparing actual results to the budget (as well as what has occurred in prior reporting periods) owners can gain important insight into how there business is performing. It is important to note that budgets will not always be perfect especially when the business is in its infancy. However by carefully adjusting the budget as the business progresses and comparing results with previous periods it provides unrivalled understanding of the business.
Control your Debtors
Getting payments form customers can be a major problem for small business owners. Whether this is caused by poor recording and tracking of outstanding invoices or customers taking too long to pay, the results can be disastrous. The flow on affects include: late payments to your suppliers and or employees, late payments to the ATO, late payments of debt and other obligations and the various penalties and consequences associated with missing these payments. In order to avoid these situations small business owners need to ensure that they are tracking invoices accurately and minimizing the amount of time between invoicing and payment. Some common strategies that small businesses employ to ensure payment on time include: upfront invoicing for poor payers and not taking on any extra work from customers who have an outstanding debt with the business.
Engage Outsiders
It is always good to get the input of professionals and people outside of the business. This does not necessarily mean engaging an accountant or bookkeeper, it simply means getting the input of some one outside the organisation. This could come in the form of a friend, a colleague or someone else with experience with finance and/or small businesses. The reason for this is that often these people will be able to provide you an alternative viewpoint to your own. This often results in ideas and/or strategies that you wouldn’t consider yourself. Although it is recommended to get a professional’s input for specific issues (such as tax and/or accounting software issues) other can often provide advice and insight for other business issues that may not be considered by a professional (i.e. industry specific issues).
Best Suited Software
Finally employing the use of the best suited accounting software for your business will save owners a lot of time. These days’ small business owners have a lot of choices when it comes to accounting software, however it is important to be aware that different programs will suit different businesses better. For example there are programs available that produce hundreds of reports, allow for employee and payroll functions, calculate GST and produce ATO statements and much more. These programs are suitable for businesses that require all this functionality. However if a small business only requires basic data entry and reporting and does not need to worry about employees and/or GST this may not be the best-suited program for them. There are also programs now that link with your internet banking and have the capability of automatically allocating transactions that occur on a regular basis. Again this may suit some businesses however if you business does not have many regular transactions then it may not be the best program for your business. Therefore it is important to consider your business and your requirements before choosing which accounting program you will go with.
Note this is not an exhaustive list of everything small business owners can be doing; but some of the more common areas where small business owners fall down. The team at Progressive Accounting Solutions are dedicated to assisting the small businesses of Geelong, the Surfcoast and the Bellarine with efficient and reliable accounting and bookkeeping services. Should you require any assistance with your small business or have any questions please don’t hesitate to contact us at info@progressiveaccounting.com.au or on 0438 329 958.