It’s really tempting as an entrepreneur to just get caught up in the excitement of starting your business, and developing your product, after all it is your baby! You may find keeping track of invoices, chasing customers for payment and keeping receipts boring and downright daunting, but beware. This is a vital part of your business, as it is how you control your MONEY! Yes, if you don’t have any money, you won’t have a business to get excited about.
Badly managed and poorly tracked finances will give you a world of stress as you will constantly be running around searching for receipts, wondering if customer A has paid the invoice due 4 months ago. Bad management of your invoices will result in poor cash flow and as you know, cash flow is the lifeblood of any business, and also you may not have enough money to pay your taxes. You do not want the tax people to get on your back, that’s the way to business failure.
On the other hand, cultivating efficient and consistent bookkeeping habits will help your business to thrive, be a lot less stressful and give you time to be creative in your day. Please don’t let your business fail due to inefficiency. Here are our 5 tips on how you can improve your bookkeeping.
1. Set up a system that even a dummy can follow
Take your time to devise and write down a system that explain how bookkeeping processes should be run. You don’t have to write a book about it! Just set up a system that makes sense, write it down so if you are not the person managing the bookkeeping, someone else can take over and follow your system. This will prevent confusion and create consistent results. If you are a really small business, you can use Excel worksheet to keep track of your invoices, when they were sent, have they been paid. And always refer to and update your worksheet. If your invoices follow sequence of number, stick to that system, and record diligently in your worksheet.
2. Keep expense receipts
It sounds obvious but you must consistently keep all of your expense receipts. You need to know how much you are spending on your business, otherwise expenditure can run out of control very quickly. This is easy with credit card purchases, as you will have both receipts and monthly bank statements against which to check them, but many people find it hard to keep all the receipts for cash expenses. These receipts matter even more since there are no backup statements. You can have a folder just for cash expenses, so you can just remember to place them in the folder every week/day. You can even record all receipts in an accounting app on your phone. Just take a photo and the receipt is stored straight away.
3. Track your receivables
You need to firstly ensure that you raise and issue invoices to your customers on time, as they cannot pay if they don’t have your invoices! Secondly, you need to ensure your invoices are tracked properly: so record the amount, when was it sent, date due, date paid. If you are a very small business, you can do all this on an Excel worksheet or there are also some very good accounting solutions which can even keep track of invoices and flag late and unpaid invoices automatically. Some software can even send reminder emails to the customer to chase up. This is your money, and if you don’t get paid promptly, you won’t be able to fund the cost of your business. Some businesses have been known to be successful in their sales, but poor in their chasing of payments, and have failed due to bad accounting management. This does not have to happen to you.
4. Get the right software
There are many different options out there, so look for a system that best meets your business needs and one that you’ll actually use. If you’re not an accountant by training, then avoid complicated systems that require a telephone book sized manual to get started. Why not ask for recommendations from friends who run businesses similar to yours.
5. Work with your accountant as a team
Your accountant is not just for the final end of year tax report, a trusted accountant is a partner for the life of your business. They can save you money, straight from the start of your business and all the way through the running of it. At the beginning of your relationship with your accountant, ask them advice as how to best keep accounting records, which will be easy for you and for them to work with at the end of the year. A good accountant can help you set up your company structure to make it tax efficient, they can help to guide its path to success, shaping it to provide better returns, and helping spot potential issues in the business before they arise.
If you need any help with keeping your invoicing and cash flow in control, give us a call. Our team at Kudos PA offers virtual assistance in secretarial services, administration, marketing, blogging, research, invoicing and so much more. We love business, and want to support you to be an entrepreneur! Give us a call if you need any help or just want to chat on 07875108255.
