4 Signs You Need An Accountant for Your Small Business

There’s so much to think about when running a small business, and you can’t do it alone forever. For one thing, handling the financial side of your business is a full-time job in itself, and you really can’t afford to take your foot off of the gas for any length of time. Without external help, it’s all too easy to lose control of your finances, which can prove disastrous.

Many small businesses put off hiring an accountant for a later date, but it pays to do this sooner rather than later. Your business is most likely to fail in its early days, and during this time, any unnoticed accounting or bookkeeping errors could compound and devastate your budding enterprise.

A good accountant is an investment in the financial health of your business, both now and the future. Of course, every business owner has a unique set of needs and circumstances, so here’s how to tell if you need an accountant so you can get back to doing what you do best.

1. You’ve Made Mistakes Before

It’s no secret that accounting isn’t exactly straightforward. If you’ve made accounting or bookkeeping errors in the past, you’ll already know how much time and effort is required to rectify them. Innocent oversights and slight miscalculations are all too easy to make but difficult to undo if they go unnoticed for too long. Furthermore, mistakes on your tax return could result in huge fines. If you’re struggling to manage your accounts and keep accurate records, then it’s time to seek help before these mistakes damage the financial health of your business or halt your growth.

2. You’re Short on Time

Running a business is time-consuming, and there are always a hundred and one issues demanding your attention. It can be difficult to find time to balance the books and ensure you’re on top of your finances with everything else going on. However, it’s imperative to maintain accurate records for tax returns, credit applications and financial planning. If you don’t have time to look after your finances, you need to seek the help of a professional accountant who can.

3. You’ve Got an Audit Coming Up

If an audit is looming, you may be in for some sleepless nights. It’s essential to make the process as smooth as possible, so your accounts and records must be squeaky clean and perfectly organised. Otherwise, you’ll be facing a barrage of work trying to straighten things out. Furthermore, any innocent mistakes you’ve missed could result in a hefty fine. Therefore, it’s worth enlisting the help of a quality accountant who can get your affairs in order, find and fix any mistakes you’ve made and ensure that you pass your audit with flying colours. It will save you money not just in fines but potentially in therapy fees, too.

4. Your Business is Growing

As mentioned, it’s never too early to hire the help of a professional accountant. Still, when your business is growing rapidly, it’s most definitely time to give up the DIY approach.

Rapid growth means new customers, new hires, more investment opportunities and many more demands on your time. However, this is certainly not the time to overlook your accounts. Hiring an accountant can help you choose potential investors wisely, manage your cash flow and use your extra income wisely.

As your business grows, new financial challenges will arise, and it’s best to have an expert on hand to deal with them when they do. Growth is fantastic, but it can lead to instability, and the right accountant can help keep your business on the path to financial success.

Summary

If your business ticks any of the above boxes, it’s time to invest in an accountant to protect and improve the financial health of your business. Qualified accountants train for many years to receive their accreditations, so don’t make the mistake of thinking you can manage your small business accounts by yourself forever. To create a successful business, you need to treat it like a business, which means taking your finances seriously and investing in the financial health of your organisation.

How Cloud Accounting Can Help Your Small Business to Grow

Most things are stored in the cloud these days: your photos, your credit card details and even your step count – so why not your accounting, too? Cloud accounting software can free up a significant chunk of your time and help you keep more accurate financial records, both of which represent big wins for your business. If you haven’t switched over to the cloud yet, here’s why it pays to move with the times.

What is Cloud Accounting?

Cloud accounting is accounting software that works over the internet rather than storing data and programs on your computer’s hard drive. Cloud-based software has disrupted and transformed many industries, and accounting is no different. Besides, it’s here to stay, so the smart thing to do is adapt and use the power of the cloud to your advantage.

Is the Cloud Secure?

Understandably, one of the biggest concerns business owners harbour regarding the cloud is its security. However, the cloud is more secure than traditional hard drive storage. For one thing, your computer is susceptible to physical damage, such as spillages, fire and electrical faults, not to mention loss or theft. If your computer gets destroyed, cloud accounting software ensures that you’ll still be able to access your data from another device.

Most cloud accounting options provide strong protection for your sensitive data and use secure solutions such as encryption to ensure that your accounts stay safe. It’s much more difficult for a hacker to infiltrate the cloud than your laptop – and easier to recover your data, too, thanks to automated backup solutions.

Flexible Working

The cloud enables you to manage your accounts from anywhere, on any device. As a business owner, this permits you to lead a more flexible lifestyle. For example, if you need to update your accounts over the weekend, cloud software saves you the trouble of having to drive to work to access your office computer.

Real-Time Updates

Cloud software ensures that all parties access the latest data, streamlining communication and encouraging more efficient collaboration. Real-time updates save time, and, as a business owner, being able to access your financial data instantly allows you to identify potential problems quickly and fast, informed decisions.

Automated Processes

Accounting is a notoriously time-consuming process. However, cloud-based software can automate many complex tasks for you, making you a lot less likely to need those headache tablets you’ve got stashed away in your desk drawer. Furthermore, cloud accounting software allows you to focus on client generation and business growth by freeing up time, allowing you to scale up rather than get bogged down in complex calculations. Like money, your time is a valuable resource, and you should always be looking for ways to save so that you can reinvest elsewhere.

Reduced Costs

Traditional accounting software has many hefty costs involved, such as maintenance, regular upgrades and system administration. These processes take up much time and can get in the way of running your business. However, with cloud-based software, upgrades are free, automatic, and won’t take a chunk of time out of your day.

Easily Scalable

Rapid growth can present an array of issues for a business. When you use traditional accounting software, it can be challenging to scale up at the same rate your business is growing. Cloud programs, however, present no such issues. It’s simply a case of levelling up your subscription to cope with increased transactions.

Summary

Cloud software makes accounting an infinitely smoother process, thus saving your business both time and money that you can reinvest in growth. Furthermore, cloud-based programs permit you to work remotely, allowing you to run your organisation with greater flexibility. Real-time updates will enable you to stay up to date and put you in control, whilst automated processes and calculations reduce human error and save precious time. The days of USB sticks are well and truly over; cloud accounting is the way forward.

6 Reasons to Swap Spreadsheets for Cloud Accounting Software

Many small business owners have been using spreadsheets to do their accounting for years now. Whilst spreadsheets may seem like a convenient and cost-effective way of managing your finances, advances in cloud accounting software mean that your business could most likely benefit from an upgrade. Let’s look at why you should swap your spreadsheets for cloud accounting software and how to make the transition smoothly.

1. Data Entry

Not only is manual data entry mind-numbing, but it also makes it very easy to make mistakes. Just one typo could lead to significant errors, including errors on your tax return, resulting in missed deductions or penalties.

However, cloud accounting software allows you to upload your receipts and invoices directly and keep accurate records, removing the need for double data entry and reducing the likelihood of mistakes.

2. Lost Data

The larger a spreadsheet becomes, the more likely it is to crash or corrupt, resulting in lost data. However, your records don’t cease to matter once your tax return has been filed. It’s essential to keep your records for audits and to track the company’s progress over time. Leaving your data in a spreadsheet leaves it vulnerable, whereas cloud-based accounting software provides multiple layers of protection to keep your information safe.

3. Integration

Spreadsheets don’t tend to integrate well, leading to stress and wasted man-hours. Saving a spreadsheet in a new location can corrupt files and break links, causing countless problems. However, cloud accounting software automatically syncs your data across various devices and is designed to integrate well with other software, permitting seamless sharing and collaboration.

4. Audit Trail

Spreadsheets don’t create a clear audit trail in the same way that accounting software does. For example, you may notice changes in the data but be unable to identify the exact details. It’s essential to keep a step-by-step record to keep your company safe and your records accurate. Accounting software lets you easily maintain a log of all changes made to your files, dating right back to their initial creation.

5. Time

Spreadsheets tend to be much more time-consuming than cloud accounting software, especially if you’re working with a high volume of data. Using spreadsheets requires you to spend much time on data entry, preparing reports and verifying information. This could cost you days’ worth of man-hours! With cloud accounting software, on the other hand, these processes take mere minutes to complete.

6. Collaboration

The sharing functionality of traditional spreadsheets tends to be slow and can become confusing when multiple people try to work on a document at once. The design of cloud accounting software facilitates collaboration and, as mentioned previously, automatically syncs across all devices, permitting seamless sharing and creating an accurate audit trail.

How to Choose the Right Cloud Accounting Software

The right cloud accounting software for your small business will depend on your particular requirements, and it’s worth asking your accountant for recommendations. We recommend considering the following:

  • Which systems do you want to integrate the software with?
  • How many people will use the software?
  • Which functions are most important to your business?
  • What is the upfront cost or subscription fee?
  • How much training is required?
  • What support is provided?
  • Is the software scalable as your business evolves?

Summary

If you’re still using spreadsheets for your small business accounting, it’s time for an upgrade. Using spreadsheets is almost as outdated as working with pen and paper! Cloud accounting software can save you a considerable amount of time and money, as well as protecting your data and maintaining more accurate records. For a relatively small investment, it offers a substantial return.

5 Common Bookkeeping Mistakes That Can Break your Business

Running a business is hugely fulfilling and often very stressful. It takes a lot of hard work to get your business off the ground, but it’s worth it to be your own boss and dedicate your professional life to something you’re genuinely passionate about. However, there’s one part of running a business that the majority of entrepreneurs dislike: bookkeeping.

Unless you’re a professional bookkeeper, the chances are that you find bookkeeping overly complex and somewhat tedious. However, sound bookkeeping is vital to your business’s financial health, and getting it wrong can have disastrous consequences. Let’s take a look at the five most common bookkeeping mistakes that can threaten – or even break – your business.

1. Failing to Include Bookkeeping in Your Business Plan

As we said above, bookkeeping is unlikely to be the area of your business that brings you the most excitement. However, failing to account for bookkeeping in your business plan is a big mistake. Your business plan lays the foundation for your future success, and it’s essential to have a solid plan in place before steamrolling ahead.

Be sure to include your financial goals and bookkeeping processes in your business plan. Make sure that you are clear on who is in charge of each financial deliverable and create a bookkeeping schedule. Many entrepreneurs get swept up in the excitement of their new venture and put bookkeeping off until later, which is a big mistake. Staying on top of bookkeeping is essential to ensure that your company stays in good financial health, so make a schedule that you can stick to.

2. Poor Organisation

Bookkeeping is complicated enough, so don’t make it worse by failing to organise your invoices and receipts properly. It’s worth taking time to set up a transparent organisational system to follow so that you don’t find yourself buried under a mountain of muddled documents later on. Cloud-based bookkeeping software can be beneficial for this, as you can upload pictures of your receipts from your smartphone, and the program will automatically organise them for you. This also ensures that you don’t lose any receipts and end up paying more tax than necessary.

3. Mixing Business and Personal Bank Accounts

Doing business with your personal bank account is a surefire way to muddle your records and enter mistakes on your tax return. It’s essential to create a separate business bank account as soon as possible to ensure that your business and personal transactions stay separate. Otherwise, it can be challenging – not to mention time-consuming – to remember which purchases were business expenses and which were personal. This may lead you to miss out on tax deductions or mistakenly entering personal items on your tax return, which could lead to penalties.

4. Neglecting and Misusing Petty Cash

Many business owners neglect to file petty cash, resulting in an incorrect tax bill and even fines. Furthermore, some business owners think of petty cash as free money or their wallet. Whilst petty cash is convenient, remember that the money still belongs to the business and that these transactions need tracking.

5. Failing to Classify Employees

It’s important to correctly classify your employees and keep track of their employment status to avoid confusion when it comes to filing your tax return. There are three main types of employees that most businesses have on their payroll:

  • Full-time
  • Part-time
  • Independent contractors

Summary

You worked hard to launch your business, so don’t jeopardise your company’s financial health by making the above bookkeeping mistakes. However, bookkeeping can undoubtedly be a demanding job, and it only grows more so as your business expands. Therefore, if you’re struggling to stay on top of bookkeeping, it may also be time to consider hiring the services of a professional bookkeeper to make sure that you stay on track for financial success. 

7 Most Common Money Mistakes for Startups to Avoid

Intelligent financial management is essential for any business, no matter how big or small. However, it can be challenging to get things right, especially during the startup stage. Poor financial planning is one of the most common reasons startups fail, so the sooner you take ownership of your business’s financial health, the better. Dealing with your finances head-on from the get-go is the best way to set yourself up for lasting success. Careful planning can help you to avoid common money mistakes and shows potential investors that you’re serious. Here are the most common financial mistakes that startups make and how to avoid them.

1. Prioritising Instinct Over Information

Following your gut is generally a good principle; it’s a dangerous game to make assumptions about your finances. It’s vital that you meticulously track your revenue and expenses and closely monitor your cash flow. If a tiny mistake goes unnoticed for too long, it could prove very damaging for your business. Using an Excel spreadsheet will suffice during the startup stage, but be prepared to upgrade to bookkeeping software later.

2. DIY Accounting

Managing your accounts by yourself will suffice for the initial setup of your business, but it’s wise to hire a professional accountant as early as possible. Juggling self-taught accounting with running a small business will eventually result in a backlog of errors, which can prove costly. Professional accounting services save time, money and stress, allowing you to focus on growth. You don’t need to hire a whole team. Start by outsourcing your taxes or setting up quarterly meetings with a financial consultant for help and advice.

3. Failing to Assign Project Budgets

Assigning a budget to a project prevents it from draining your finances should something go wrong. A clear budget will allow you to reassess your finances should the project require more money and make smart decisions that won’t damage your business.

4. Disorganized Files

The importance of balancing bank statements and keeping receipts in order cannot be overstated. Patchy bookkeeping can cause chaos for your business and result in trouble, not to mention wasted man-hours trying to resolve the problem. Keeping receipts and cross-referencing your accounts with your bank statements is vital for transparency and future success.

5.  Misunderstanding Your Target Market

For your business to be successful, you need to understand what your customers need. Knowing your target market helps you reach them and price your products and services appropriately. Here are some questions to consider:

  • What is your market position?
  • What need do you fulfil for your customers?
  • How much value do your products or services provide?
  • Who is your competition – and what makes you stand out?

Miscalculating prices can prove to be a grave error for a small business, but knowing your market well will help you to figure things out.

6.  Hiring Quantity Over Quality

Over-hiring is an expensive mistake to make. Hiring employees is one of the most costly parts of running a business, so going overboard is a colossal waste of money. It can also damage staff morale and productivity, and lay-offs further down the line will only amplify the problem.

Bad hires are another threat to a small business. Hiring the wrong employee can create an imbalance within the company culture. In turn, this can negatively impact other staff and even damage your business’ reputation. Don’t rush the hiring process. Taking extra care to avoid mistakes can save a lot of trouble in the long run.

7. Miscalculating Expenses

To keep your business afloat, you need to know precisely how much cash your business burns each month. Keeping a meticulous record of your expenses allows you to understand where your money is going and how much you’ll need to survive. Underestimating your cash burn can land your business in hot water, so create a projection of your monthly expenditure and be sure to monitor it closely, making adjustments whenever necessary.

Conclusion

A successful business needs a solid financial foundation, so keep these mistakes in mind. No business is invincible, and it really does pay to be cautious and always stay one step ahead.

A Guide to Credit Control for Small Business Owners

Credit control is the process by which businesses extend credit to customers to make it easier for them to purchase a good or service. This could be by delaying payment or breaking down the total purchase amount into more manageable instalments. This strategy drives up sales, but it’s essential to be careful about how you extend credit and to whom, or you could end up in financial hot water. Research by Graydon found that over half of business bankruptcies are related to poor credit management. We’ve put together a guide to credit control for small businesses to help you manage this process wisely.

Credit Control Policies

It’s essential to choose the right credit control policy for your business. There are three policy levels:

  • Restrictive. A low-risk strategy whereby credit is extended only to those customers with a strong credit history.
  • Moderate. A medium-risk strategy where a business extends credit to a more significant proportion of customers.
  • Liberal. Under this policy, a business extends credit to most customers, generating more sales but running a higher risk at the same time.

If you aim to gain a significant market share, a liberal credit control policy may suit your business. However, if you are already experiencing cash flow issues or operating at a low-profit margin, it may be more prudent to be more restrictive.

Credit Control Factors

There are four primary credit-control factors:

  1. Credit period: the length of time a customer has to pay for a good or service.
  2. Cash discounts: when a business offers a customer a discount if they pay in cash before the end of the credit period. This helps with cash flow.
  3. Credit standards: This is the set of criteria used to determine whether or not a customer qualifies for credit.
  4. Collection policy: the steps a company will take to collect late payments. Strict policies mean faster collections but may also drive customers away.

The best practices vary from business to business; some will profit from more restrictive measures, whilst others may be better positioned to be more liberal. It’s best to consult your accountant, CFO or financial director when deciding how best to implement the above credit control factors for your business.

How Creditworthy Are Your Customers?

Before agreeing to extend credit to a new customer, you should check how creditworthy they are. Consider the following:

  • Can your customer afford to pay the total amount within the agreed-upon time frame?
  • How likely is your customer to encounter financial problems in the near future?
  • How strong is their credit history? Do they have a record of late payments?

Do not overlook these critical questions in your haste to make a sale, or you could find yourself encountering some severe cash flow issues as a result. You should always perform an online credit check before issuing credit using agencies such as Experian. Often, these agencies charge extra for more detailed credit reports, but this information can prove extremely useful and may be worth the additional fee.

Trade References

Before extending credit to a business, you should obtain trade references from two or more of the company’s regular suppliers to ensure that they are creditworthy. Each reference should include the supplier’s name and details, as well as a record of late payments or exceeding credit limits.

Credit Terms

It’s vital to arrange your credit terms to protect your business carefully. It would be best to decide on the maximum amount you will offer your customer, the credit period and any late fees or early payment incentives. It’s essential to make everything crystal clear to your customer at the start so that they cannot blame late payment on a misunderstanding due to poor communication. It’s also worth considering hiring a business lawyer to draw up a sales contract to ensure that your terms are watertight.

Summary

Getting your credit control right is crucial to the success of your small business. When implemented correctly, credit control can boost your revenue and encourage repeat business. However, poor credit control management can result in cash flow problems, mounting debts, and stress. Therefore, you should proceed with caution and take the time to arrange credit control terms that are most beneficial to your unique business.

6 Steps to Take If Your Small Business is Running Out of Money

It’s always worrying when you notice that your small business’ bank account is running low. Whether you’re scaling up or simply going through a quiet period, negative cash flow can take a significant toll on the financial health of your business. Hard times don’t have to spell the end for your enterprise, however. It’s time to re-evaluate your current practices and employ some of the following steps to ensure that your bank balance bounces back.

1. Re-Evaluate Your Pricing Structure

Difficult financial times are a sure sign that it’s worth reconsidering your pricing structure and making some changes. You may be undervaluing your services and selling yourself short. Take time to consider the value you provide and research your competitors’ rates, too.

Of course, your existing customers won’t be happy if you hike up your prices overnight. You deserve to get paid what you’re worth, but during challenging times the last thing you want to do is aggravate your entire customer base! It’s fine to charge new customers higher prices from the get-go, but implement more gradual price changes for your existing customers and give them plenty of notice.

2. Cull Your Software Subscriptions

Over time, software subscriptions mount up, and many business owners continue paying for software that they’ve ceased to use. Make a list of your subscriptions and only carry on paying for the ones which genuinely deliver value to your business. You’ll be surprised how much money this simple step can save you, especially over the course of several months.

3. Reduce Your Wage

For short-term cash flow issues, taking a smaller wage as a business owner can help to smooth things over. You deserve to get paid, but giving up a chunk of your salary for a month or two may be able to protect your business’ bank balance until cash begins to flow more freely again.

4. Go Green

Power usage tends to be one of the highest costs for a small business, so cutting down on energy costs can help you save money. Installing energy-saving bulbs, investing in insulating blinds and replacing paper towels with hand dryers can significantly reduce your monthly energy bill.

5. Shorten Your Payment Schedule

Many businesses allow their customers or clients up to 90 days to pay invoices, but if your funds are dwindling, it’s time to reduce this window. Cash flow is just as important as profit to the survival of your business, and if you run out of available funds now, getting paid in two or three months won’t help you much. Consider shortening your deadlines to 30 days or less to improve your cash flow and create a more continuous revenue stream.

6. Don’t Depend on a Handful of Customers

Of course, loyal customers are important to any small business, but becoming overly reliant on a small number of customers puts your business at risk. In this situation, losing a single customer can do significant damage to your finances, so don’t put all of your eggs in one basket.

Do nurture your existing customers and encourage them to spend more, but make sure your entire organisation doesn’t depend on repeat business from one or two sources. Taking on just a few new, smaller clients can help when your bank account is suffering.

Summary

A dwindling bank account is never good news for a small business, but it’s not necessarily a death toll. By taking action today and implementing the above money-saving steps, you can get your business back in the green and improve both your profitability and cash flow.

5 Simple Ways for Startups to Improve Cash Flow Management

Cash is king in business, and knowing how to improve cash flow is essential for the success of your startup. Think of cash flow as blood flow, and you’ll understand just how vital it is to the health of your business; without it, you’ll die. That sounds bleak, but it is crucial to manage your cash flow properly from the very beginning and protect your business against any problems along the way.

Even if your business is very profitable, you’ll struggle to cover your costs without sufficient funds available. However, at the same time, an excess of cash suggests that you’re not re-investing enough into scaling your business. Finding a balance takes accuracy and attention, but it can be done by following the steps outlined below.

1. Regularly Prepare Cash Flow Statements

Before you can start planning for the future, you need to get a clear picture of where you are right now. An understanding of this is where cash flow statements come in. A cash flow statement provides an overview of cash coming in and going out of your business. This overview allows you to perform a detailed analysis of the financial health of your business.

A cash flow statement requires a lot of data, so a cash flow calculator can be very useful in helping you prepare this document. You also might want to think about hiring an accountant to ensure that your statement is accurate since getting this wrong can lead to more significant mistakes down the line.

2. Create Cash Flow Projections

It’s essential to understand what your cash flow is likely to look like in the months to come so that you can plan and manage your finances wisely. Realistic cash flow projections can help you to invest your money at the right moment and account for any potential pitfalls along the way. This process can be time-consuming and complex, so it’s worth using accounting software or enlisting the help of a professional. These projections are incredibly valuable when scaling up your business, so they’re worth the investment.

3. Prepare a Safety Net

Any entrepreneur will tell you that it pays to have a safety net, particularly when you’re scaling your business. Investing in growth can lead to short-term negative cash flow, which is perfectly okay if you’ve prepared for it. A cash reserve will help smooth things over when you’re having cash flow problems and ensure that you have enough funds available to pay suppliers and staff. It’s also worth investigating whether a credit card or line of credit could be beneficial to your startup to help you keep operations going when the cash runs dry.

4. Plan For the Long Term

As important as it is to control where you are right now, your business won’t be this way forever. After all, the ultimate goal is to grow out of the startup stage, which means significant financial changes. Furthermore, many factors could affect your cash flow in the future, such as inflation, recession or late payments from clients. It’s always best to be prepared for the worst to protect your business against any eventuality. Take some time to research and forecast potential changes in market conditions that could impact you in the future. Again, it’s worth consulting your accountant for advice that could help to protect your business.

5. Stay On Top of Invoices

It’s important to manage cash inflow effectively, and sadly, you can’t just bank on customers always paying you on time. You need to ensure that you send invoices promptly, set clear payment deadlines, send reminders and chase up late payments. If you have a large customer base, this can be a time-consuming process, and it may be worth looking into accounting or invoicing software to take care of this for you. Not only does this help you to manage cash inflow accurately, but it also frees up your time for more valuable pursuits.

Cash Flow is Key to Your Success

There’s a lot to think about as an entrepreneur, but managing your cash flow well is one of the most important ways to ensure your business’s financial health. Not only does this help you to protect your startup against market changes and late payments, but it also enables you to invest your money wisely and at the right moment. Good cash flow management isn’t just about protecting your business from collapse; it’s also vital to help your startup grow and flourish.

How to Analyze Your Business’ Financial Position

Learning how to analyze your business’ financial position is essential in planning a business strategy. Here are the crucial steps to do just that.

Every company should pay attention to its current financial state. It can be of immeasurable value for future business ventures and financial projections. Not to mention serving as an orientation point when deciding on the direction the company will move.

Proper financial analysis is complex and requires a level of understanding of the relevant information. But if you approach the task with care and attention by following the steps below, you’ll manage to get a clear picture of your company’s financial position.

Step #1. Analyze the Value Chain

The value chain is a process that identifies activities related to the creation, manufacturing, and distribution of your product. This process also involves a thorough examination of the internal activities to determine which are the most valuable and which need improvements.
Reviewing individual steps and their costs will give you valuable insight into the basic expenses of making your product ready and available for sale.

Step #2. Review Financial Statements

When you review the financial statements, it’s essential to understand the vital components and terms. Here are some brief explanations of what you might see in your financial information:

  • The balance sheet will usually be your main focal point. This statement presents assets and liabilities, as well as equity, on an annual basis.
  • Under assets and liabilities, you’ll encounter both current, expected to last for less than 12 months, and non-current, which will last for more than a year.
  • Dividing total assets by total liabilities will give you the current ratio, which is a reliable way to assess your company’s ability to fulfil all ongoing obligations.
  • Subtracting liabilities from assets produces the book value, which expresses the shareholder capital and company profits.

Step #3. Measure Risk and Potential Profit

Once you get a firm grip on your financial statement, you should examine how profitable your business is at the moment and compare that to the company’s assets and equity.

Doing so will help you understand how well your company can deal with the market’s risks and challenges.

The crucial aspect of this step is comparison – you’ll need to look at current data concerning past numbers, as well as competitors and marketplace averages.

Step #4. Create a Forecast

To make the most out of the analysis, you should use the gathered information to create a financial forecast. The forecast will derive from your assumptions about how your business will grow and the market situation in the foreseeable future.

When you build a forecast, it will be a valuable tool for detecting areas of your business that require improvement. It will also prepare you for challenges that might lie ahead.

Analyze, Plan, and React

Dealing with the challenging task of financial analysis shouldn’t be a solo effort. Developing a thorough understanding of the financials is to formulate a strategy and execute it efficiently.

Cut down the costs, prepare a precise plan of action, and be ready to push your business in the right direction.

5 Bookkeeping Habits to Help You Handle Your Cash Flow

Bookkeeping is about more than just complying with government regulations when tax season rolls around. A solid bookkeeping system provides you with essential information that you can use to improve your business and ensure financial success. According to research by a U.S. Bank, 82% of businesses experience cash flow problems, so we have created a list of bookkeeping habits to help you handle your cash flow, to implement to ensure that your business won’t run out of funds.

1. Monitor Your Transactions Closely

Staying on top of your transactions is the cornerstone of a sound bookkeeping system. Each day you should take time to ensure that your deposits and receipts match up. Take a look at whether or not:

  • Cash is deposited according to the proper schedule
  • Your merchant services fees have changed at all
  • There are any unauthorised payments on your account

Making a habit of this daily review will keep your records up to date and allow you to rectify any mistakes quickly rather than allow them to compound.

2. Track Every Single Expense

There’s just no way around it. If you want to manage your bookkeeping well, then you need to track every single expense. Fortunately, this is relatively easy to do when you open a separate business bank account. Your business bank account or credit card will function as a basic accounting system and keep a record of all of your transactions in one easy-to-access place.

Pay with a card, rather than cash, whenever possible to automatically create records. When you pay with cash, it’s all too easy to forget to log the transaction, lose your receipt and then have to forgo the write-off when filing your tax return.

3. Check Your Financial Data Monthly

Checking your transactions every day isn’t enough. At the end of each month, set aside time to analyse financial data and identify trends that may affect your business, either positively or negatively.

Tracking your income each month allows you to see which areas of your business are growing and which need improvement. It also allows you to look at which activities generate the highest return on investment and gather data to inform a future course of action. This data is also instrumental in identifying and predicting seasonal trends.

Daily income tracking is essential, but going over your numbers each month will help you see the bigger picture and understand how well your business is faring in the long term.

4. Invest in the Right Accounting Software

Cloud-based accounting software is no replacement for the services of a professional accountant or bookkeeper, but it can certainly help take care of the grunt work. Programs like Quickbooks and Xero streamline the management of your financial documents, making it faster and easier than ever to file and organise receipts.

As well as this, accounting software can help automate a lot of your invoicing. You can create a dashboard that will instantly tell you which clients have outstanding payments so that you can take fast action and collect the balance more quickly. Furthermore, you can automate invoice reminders and automatically add late fees to incentivise customers to cough up.

5. Hire a Professional

We’re not sure that this counts as a “habit” per se, but the sooner you outsource to a professional bookkeeper, the better. A professional will offer a keen insight into your current cash flow situation and offer advice on how you can make significant improvements.

Furthermore, a bookkeeper will be able to spot trends and alert you if anything looks amiss. Although forking out for an added expense may seem counterproductive when improving cash flow management, a professional bookkeeper will save you time and money and protect your business from fines, fees, and cash flow problems.

Summary

Cash is king in business, so implement the above habits as soon as possible to protect and improve your company’s financial health. It’s hard to plot steady growth when you are continually running into cash flow problems. So if you find yourself struggling to stay on top, don’t hesitate to invest in the services of a professional bookkeeper who can keep their finger on the pulse and the cash flowing in the right direction.