Finance and accounting play a critical part in the operation of any small firm. Starting and maintaining a small business is never simple, and running a business without adequate financing and operating capital is nearly impossible. When you’re running a small business, you need to remain on top of your bookkeeping. Your firm will fall before it flourishes if you don’t manage debt, receivables, and marketing spending properly.
Money is the lifeblood of every business, and without it, there is no control over the business. For small businesses to build inventories, fund operations, and bridge the gap between billing and payments, they need access to cash and credit. The majority of small firms fail due to cash flow issues, and studies suggest that more small enterprises fail each year than are found. Furthermore, dealing with finances can be difficult for small business owners, so using organizational tactics and technology may be really beneficial.
The key to small business financial discipline is to realistically balance needs and wants. Small businesses must plan ahead and work diligently to ensure that their records are complete and accurate. The flow of money can be managed and hence the course of the business controlled if the small business’s revenues and expenditures are appropriately accounted for.
1. Invest in the future and growth
Small business owners should not overlook their role and personal contribution to the company and should compensate themselves appropriately. It’s important to make sure that the business and personal finances are in good working order. Aside from paying themselves, it’s critical for business owners to set money aside and investigate growth options. This can help the company grow and move in the right manner financially. A small firm that wants to keep growing, innovating, and attracting the best people shows that it is willing to invest in the future. The improved level of service will be welcomed by customers. Employees will respect the commitment to the organization and their careers. And, in the end, it will add more value to the company.
2. Maintain good business credit
As the company grows, the business owners may wish to buy more commercial real estate, get more insurance policies, and take out more to facilitate all these pursuits. Getting clearance for all of these trades and acquisitions can be tough if your company has bad credit. Pay off all of the debts as soon as possible to maintain good credit. For instance, allowing the business credit cards to run a balance for more than a few weeks is not a good idea. Avoid taking out loans with interest rates that are not affordable. Business owners should only look for funding that they can return fast and simply.
3. Maintain Accurate Records
A solid record-keeping system is critical for small businesses to have in place. It is vital that the accounts are current and accurate in order to prepare true and fair annual accounts. Much of a small business’s day-to-day accounting may be tracked and managed using online banking services, but for the purpose of simplicity, it’s best to keep all of the financial records in one place. Small businesses might benefit from careful record keeping in terms of tax returns as well as the avoidance of theft and fraud. It also aids small businesses in keeping track of expenditure, creditors, and debts, applying for funding, reducing accounting costs, and paying proper taxes on time, and is one of the most significant finances and accounting tips.
4. Install a modern accounting system
Small firms must implement a sound accounting system that allows them to produce accurate and up-to-date financial data. Its significance is such that its failure can cause problems in other systems. Such systems also incorporate effective and efficient filling and documentation processes. The people who are normally in charge of preparing financial data are likewise highly qualified. Financial statements are frequently prepared using pre-defined accounting rules and principles. Accounting apps can also be used since they interact easily with a variety of services, making them more efficient and convenient to use. Accounting systems not only make day-to-day tasks easier, but they also record accounting actions in the background when documents are generated. The amount of time that an accounting system can save a company is far too big to overlook.
5. Have a Good Billing Strategy
Every company owner has a client who is perpetually late on payments and invoices. Managing small business finances also includes managing cash flow to ensure that your company runs smoothly on a daily basis. It may be time to get creative with how to bill particular consumers or clients if there is trouble collecting payments from them.
Cash flow problems, which are a primary cause of business failure, can arise when there is too much money locked up in unpaid invoices. Instead of badgering them with frequent invoicing and phone calls, consider a different strategy if you have a chronic late-paying customer, which we all have. ‘2/10 Net 30’ should be the payment terms. This means that if a consumer pays their invoice within 10 days, they will receive a 2% discount. Otherwise, full payment is payable in 30 days.
6. Execute Accurate Invoicing Procedures
Small businesses require an effective and precise invoicing system to ensure that they are paid for the work they have completed or the items or services they have sold. Invoices must also contain individual client information, be processed and delivered quickly, and meet the strictest accuracy criteria. Invoices are more than simply reminders for consumers to pay; they are physical records of a transaction’s terms, therefore it’s critical that the information submitted is correct and full. Adding extra information to an invoice, canceling an incorrect invoice, or making several copies will bog down the accounting and accounts receivable processes. The costs of doing business can be controlled by checking invoices.
7. Hire a Professional to Handle Taxes
It is vital for small businesses to hire the correct tax professional because doing so can save them a lot of money. The tax professional should have special experience and understanding in assisting small businesses, and it’s even better if the person is familiar with the type of small business or industry. Small business owners frequently do their own taxes in order to save money. However, failing to hire a tax professional might end up costing a small business a lot of money in the long run.
Even if a small business qualifies for a deduction, it may not be claimed, or the tax bill may be underpaid, resulting in penalties and other fines. Tax professionals stay up to date on ever-changing tax regulations and can even assist small businesses in anticipating prospective tax increases. It’s a good idea to cultivate a solid relationship with your tax advisor so that you may contact them at any moment throughout the year.
These are just a few of the finance and accounting tips.
Managing the finances of a small business requires discipline and desire, as well as the proper processes and controls. Small firms may substantially reduce their funding and accounting gaps by having access to the correct tools and resources and leveraging technology advancements. A professional finance and accounting firm like Viaante Business Solutions can help a small business that does not have a fully staffed financial department.
Automation and digitalization are the only solutions for CFOs to effectively handle the growing value and complexity of their work.
Viaante’s F&A offering leverages industry know-how and proven best practices. Our breadth of global engagements, with experiences across multiple industries, enables us to deliver quality business outcomes and operational efficiencies that accelerate your F&A transformation. By associating with us you can experience an increase in payment accuracy, accelerated revenue cycles, and gain faster access to information.