You are a successful business owner; you are good at what you do, and you enjoy it. You are happy, your clients are happy, life and business could not be better – or could it?
As a business owner,most of your time is spent focusing on ways to reach your clients & help them. This is a fundamental tenet of business and making money. However, in doing so the easiest way to make money is often overlooked – and that is by looking at your internal accounting structure.
If your bookkeeping records are not organised, current & accurate, you are wasting an opportunity to tighten your costs and increase the financial health of your business.
The main benefits of keeping your books current are:
- Know your cash flow.
Cash flow is one of the most important areas that keeps you in business — if you cannot pay your bills, you will not stay in business for long. So, if you are short on cash, that will likely stress you out and keep you up at night.
According to a U.S. Bank study, 82% of businesses fail due to poor cash management. When your books are set up with a good system, understanding your cash flow position is as quick as clicking a button to run your report. You will know what bills you have coming up, and if you have enough cash in the bank to cover them. This allows for proper planning and if a potential problem arises, you can be aware of the fact before it stresses you out and allows you to be proactive rather than reactive.
- Be current on client payments.
If you want to keep your books current, you must invoice clients immediately, which gets your payment in the door quicker. You can also run reports on a weekly basis that will show when clients are late in payment, so that you can follow up faster and prevent a late payment from becoming an issue. This helps with maintaining excellent client relationships & retention. Your client will appreciate your organized & efficient follow-up, rather than having a payment dispute down the road. A lot of accounting software let you automate this at specific intervals.
- Never pay late fees and interest charges.
Current books mean that you know what payments are due when, and you can manage your cash flow to ensure you have the cash to pay the bills when they are due. This saves a lot of money on late fees
and interest charges. as well as helps maintain supplier relations. Your suppliers will value you as a good client, and often offer benefits or discounts for preferred clients. This will also improve your credit score and allow you to leverage more money and increase your options. Cash may be king, but credit keeps the country afloat!
- Identify leaks before they flood
When your books are current, you can see where you are spending more on a service than you intended to. Marketing is typically a large expense, so keeping current records allows you to monitor the pounds you have spent there, and helps you manage your budget accordingly. Running regular reports allows you to determine earlier on when you are spending too much on a certain expense in your business.
The bottom line is when you keep a good accounting system in your business, your financial reports will identify issues early in the process and resolve them before they become a bigger problem. You can plug money leaks in your business very quickly. Just by tightening up your accounting processes & procedures, when you start plugging money leaks, make cost adjustments and changes, you are ensuring you are keeping your business profitable.
Get in touch 02082498007 with us at Outsourced ACC Ltd if you would like to discuss options to increase your profitability and how the right software and support can work for you!
Written by Andrew Callister