As a small business owner, you’re probably aware of the importance of managing you company’s finances. Regardless of the product or service that you’re offering, poor financial management can quickly spell disaster for you and your company. When one in three businesses fail in the first three years, improving your business cashflow is the key to sustaining and building a successful business.
Being able to properly manage your small business expenses is a good way to improve your business cashflow. However, staying on top of your bills and invoices is essential because it ensures that you’ve got cash on hand and that you’re able to pay your employees and suppliers. If your business does not have a system in place to keep track of invoices and bills, your business financials will quickly become the center of your problems and interrupt your ability to keep your business running.
1. Creating a System to Keep Good Records
If your business financials are not organized from the start, don’t delay a moment longer and let that problem snowball. The most important part of staying on top of your bills and invoices is simply having a good bookkeeping system in place. Choose the system that you or your bookkeeper will utilize on a daily basis. Whether you choose a system that involves a paper and pen, excel spreadsheet, or an accounting software, keeping good records allows you to stay organized and in control.
Unfortunately, a system that involves paper and pen is antiquated and will also leave a paper trail of clutter. With spreadsheet, errors are commonly made and there is a need for double entry. Having an accounting software will allow you to view your company’s financial situation and remind you of invoices and bills that are past due. An accounting software keeps track of payments that are coming up and payments that are overdue. This allows you to remind customers in advance when their payments are due and to also chase late payments before you run out of cash. In addition, you can keep your business cashflow healthy by paying bills when they’re due. Paying late could harm your trustworthiness and relationship with your supplier, who may then reduce your net terms or credit limit for future purchases.
2. Establishing a Routine to Review Your Financials
Reviewing bills and invoices should consistently be a part of your work routine like paying your staff. Having a routine to review your financials will prevent bills and invoices from stacking up. Reviewing your financials routinely is important because it will give you a warning to any future problems. By the time you receive a notice from your supplier about a bill past due or if you’re writing off a bad debt, it’s already too late. Knowing your business cashflow will also help you to strategize and plan in other business areas.
It is recommended that you reconcile your records daily and review your Accounts Receivable (AR) and Accounts Payable (AP) reports weekly. Depends on the nature of your business, the frequency to review these reports may vary but you should review your financials more often if you’re having cashflow issues. An accounting software is able to quickly display both AR and AP reports so you can anticipate and avoid problems before they happen (resolving invoice issues, avoiding bad debt write-offs, paying a bill twice, or vendor disputes).
3. Asking For Help When Needed
Many small business owners decide to act as their own bookkeeper but it can be frustrating to handle their finances if they’ve never had any prior experiences. One of the most common complaints is that small business owners have a difficult time staying on top their bills and invoices because the process of entering and sorting data is time consuming.
If you’re having a difficult time with your bookkeeping, it’s highly recommended that you employ a bookkeeper to help you keep organized. If you’d like to collaborate with your bookkeeper or accountant, you can consider an online accounting software because you’re able to collaborate with your bookkeeper over the internet in real time and you won’t need to relinquish control. You and your bookkeeper can login, record bills and invoices, review your financials, and finally improve your business cashflow.
If you’re looking to improve your business cashflow, staying on top of your small business bills and invoices with these three tips will allow you to do so. Having an accounting software will dramatically help by being able to organize and manage your financials. In return, it’ll give you a better idea of your business finances and help keep your business up and running.
This article originally appeared on Servora Blog and has been republished with permission.