As the owner of a small business, you’re no doubt aware of how damaging even the slightest financial mistakes can be. Unlike larger firms that often have cash left in their budget, and a disaster recovery procedure in place, small firms are pushed to the brink as it is – without taking into account any other issues, financial or otherwise, that may emerge.
The world of accounting is always changing, as new technology is introduced and cultural influences sway regulations this way and that. It can be incredibly difficult for independent and startup companies to compete with their larger counterparts, but compete you must. You see, while your firm may not have the manpower, budget, or technology that some of the country’s biggest brands do, you have heart, passion for what you do, and a drive to succeed. Perhaps you’re not turning over big profits just yet, but that’s not to say you never will.
As you set the wheels of ambition in motion, it may be time to take a quick look at your books. Are you on top of your accounts, or do your figures let you down? Accounting is just one area that some small firms struggle with, and yet it’s perhaps the most important part of business. In this blog post we’re going to tell you how to avoid some of the biggest pitfalls. After all, you may be a small fish in a big pond, but that’s no excuse to let your accounting issues dominate your ability to do business.
Preventing accounting issues and protecting your business
From invoicing and payroll, to tax, cash flow, and managing bills, accounting is one of the most important aspects of any firm, small or large; how you handle your finances and conduct yourself with regards to money can say a lot about the way you do business and affect any prospects your company is ever likely to have. It’s essential that small firms stay on top of their accounts, and yet so many fall at the first hurdle.
So, what are some of the biggest issues, and how can they be avoided?
Outdated accounting practices
It’s not enough to keep a track of paper trails these days; most accounts are now digitised, meaning they can be stored more securely, traced with ease, and accessed more conveniently. While letting go of paper trails and turning to technology can be daunting for smaller firms that have been used to the old school, keeping up with the times is absolutely vital; many clients and companies that you deal with will be operating alongside such technology, so it’s important to keep your systems and practices as compatible as possible. What’s more, the ability to email invoices ensures you have a record of when they have been sent and received, and provides a back up should any issues arise.
Failure to embrace technology is one of the biggest accounting issues that many small firms face, but it’s an easy one to fix. Companies such as Invoice Home are a great resource to turn to when you begin digitising your business, providing invoice template Word documents so that you can create new files in an instant. Meanwhile, accounting software is a fantastic place to start if you’re looking to update your records and banish the paperwork; as we told you, there really is no excuse to fall behind your competitors.
Incomplete, or incorrect accounting records
As the manager or owner of a small business you’re no doubt used to having an answer for everything; from marketing queries and human resources concerns, to customer service disputes and inventory issues, your mind is on the go every second of the day – often without rest. However, when you’re juggling so many balls at once it’s so very easy to drop one. Don’t let your accounting be that ball. Do you know how much your business turned over during the last quarter? Could you quickly and easily find out what invoices have been paid, and which are still pending? What assets is your firm in possession of, and what’s your cash flow? With the imminent arrival of quarterly tax assessments for small businesses it has never been more important to keep on top of your finances, and to ensure that records are up to date. Incomplete and incorrect accounting records can spell disaster for small firms, so consider outsourcing your accounting to ensure it’s done properly, or invest in a program that will manage your finances for you.
Cash flow and mishandled finances across the business
An extension of the issues that surround incomplete and incorrect filing, mishandled finances can cause no end of trouble for firms of any size. Do you know what your business’s liquid assets are? Do you have tabs on the money that’s being moved around your accounts? Could you say what money is being used for, and where it’s going? An issue caused by poorly staffed finance departments, outdated technology, and improper record keeping, mishandled finances can impose severe restrictions on your business, and lead to you believe that there’s more in the pot than there actually is. It’s so important for small firms to know how much money there is and what it’s being used for; imagine spending money based upon projected income, only to discover that invoices remain unpaid. The failure to secure payments, or to invoice correctly, is on you when those books don’t add up, so remain vigilant with your firm’s money. Again, outsourcing your accounts to a consultant who will balance your books is a great idea, while accountancy software will ensure your figures are always displayed in black and white – or however you understand them.
Accounting issues are the scourge of small businesses everywhere, but tackling your finances needn’t be daunting. Indeed, understanding what needs to be done and keeping on top of your paperwork should become second nature for all small business owners – and that’s before you begin to turn a profit. While many accounting programs will do the hard work for you, it’s always a good idea for businesses to grasp their finances without the assistance of technology; after all, to whom can you turn if the technology fails? It’s essential that you keep abreast of accounting standards, or the Generally Accepted Accounting Principles (GAAP), and that your firm is registered with the right governing bodies. Finally, consider outsourcing your accounts, and employing the services of an accounting specialist to get your paperwork in order. There is no excuse for poor bookkeeping these days, so master the basics now for a prosperous future.