Entrepreneurs have a lot on their plate as they manage their business. They oversee various aspects; from inventory and supply chain, to manpower, accounting and audit, to customer service. Doing business is way more than just purchasing goods and selling it to people. For every business to flourish, a business owner has to know how to manipulate his profit. This is where accounting practices come in.
Read the list below to learn crucial accounting tips for your small business.
1. Keep track of your spendings
If you haven’t been using any systematic means to keep receipts and POs, now’s the time to do so. Bookkeeping is important because it lets you verify day-to-day transactions for categorization. Through bookkeeping you also get to reconcile your bank statements. By keeping your records intact, you get to monitor your expenses so you can prepare financial statements. You see if you’re spending too much on a commodity or service that isn’t really doing well. It helps you decide where to and where not to spend your capital.
2. Compute your Gross Margins
Remember that it’s not enough to sell everything on the shelf. At the end of the day, it’s not just sales that matter. What gets left after you’ve paid for costs and expenses is what will keep your business running. Determine your Cost of Goods Sold and subtract it from your revenue to get a rough estimate of your Gross Margin.
3. Be ready for unexpected expenses
Whether it’s a calamity or furniture and equipment upgrade, you need to have ‘backup cash’ for immediate and unavoidable expenses. During months where there’s a peak in sales, save as much as you can.
4. Hire “who’s” necessary
With all the ads you see on the internet encouraging you to try DIY accounting, it can be easy to get carried away. Because you’re in charge of your business, you try to “not spend” on people whose work you think you can do. But having professional help beside you when you’re confused about where your money went can prove to be a valuable asset for any entrepreneur. Using the best accounting software is essential but getting advice from an expert is better. Accountants or bookkeepers will keep your finances in order and transparent to avoid discrepancies.
5. Don’t neglect your clients’ unpaid balances
Your accounts receivable may be one of the more attractive items to look at, but pending collections shouldn’t be taken for granted. Do not let your customers miss or avoid their regular dues. Unless you’re in the lending business, it’s not healthy to let your clients have the mentality that credit is okay, or worse, that not paying any outstanding balances is perfectly fine. Stand your ground and do not release their orders unless they’ve paid costs. If you have clients who haven’t paid their previous orders, settle those first.
6. Monitor your labor costs
Your manpower is an integral part of your business’ success. Regardless of how many people make up your personnel, make sure they are compensated well and fairly. Do not be stingy on perks and benefits, especially for well-deserved employees.After all, happy employees make a happy company.
7. Make a list of regular payments
There are expenses that you pay on a regular basis and being proactive helps minimize labor.
8.Do monthly profit forecasting
Don’t get drowned with complicated calculations. Come up with a detailed and accurate summary of obligations and expenses to get an idea of how much you need to maintain each month to stay afloat.
Start right and start strong. Prioritize what’s important and engage in activities that will help you grow your business.