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4 Simple Steps To Managing Your Cash Flow

4 Simple Steps To Managing Your Cash Flow

A small business needs to ensure that there is a steady flow of cash by managing accounts, sending invoices to customers, collecting and reconciling payments. If these practices are not regularly followed, it will be difficult for your business to survive. Some businesses do not want to spend money on an external bookkeeper. However, if you are a savvy business owner, you will realise that a bookkeeper is going to be helpful in ensuring that your cash flow is properly managed. Aside from hiring a bookkeeper, it is also important to monitor your financial activity. This way, you will know whether or not you still have enough money to pursue your plans for the future. 

Once you have sorted your bookkeeping, make sure you manage your cash flow:

Plan ahead

You need to save cash for a rainy day. While it is good to hope for the best, it is also important to plan for the worst. This is why you need to anticipate needs by planning accordingly. If you have to pay for your monthly expenses, prepare enough money so you will no longer have to worry about a bill coming out of nowhere. 

Review your financial report

Your bookkeeper takes care of your income and expenses and you will know about your financial performance if you dedicate up to 30 minutes to the bookkeeping task. For you to stay on top of your bookkeeping game, make sure you check if there are problems that you need to properly address. When you have time for reviewing your report on a daily basis, you can prevent any task from piling up.

Encourage customers to pay on time

It is not enough that you send invoices as you also need to make sure that they pay on time. When you encourage timely payments, your monthly expenses do not have to suffer. You can give incentives to customers who make it a habit to make timely payments. This is more effective as compared to chasing late payments. 

Look for cash flow instead of profits

Many businesses have the tendency to focus on profits without realising that it naturally flows. For businesses to continue to survive, managing cash flow effectively is necessary. A business that is profitable does not necessarily mean that it has enough cash flow. You will still have to keep your finances in check. Avoid spending when you know you do not have enough cash to cover your monthly expenses. Monitor the money you spend on lunch meetings and occasional business travels. 

Costly Mistakes You Make In Managing Your Cash Flow

Costly Mistakes You Make In Managing Your Cash Flow

A robust cash flow is a strong indicator that your business is on the right track. However, cash flow problems are all too common and one of the main reasons some businesses fail. Find out what these cash flow errors are and how they can be avoided. 

Untimely payment of accounts receivables

Accounts receivable is a good sign for businesses because it means that money will come in. Unfortunately, you still have to collect accounts receivable before you can treat it as profit. When expenses arise, you may even end up short. This is the most common cash flow problem that can become a patter if left unsolved. Past-due payments must be collected to prevent cash flow problem. A clear guideline regarding the consequences for late payments must be put in place. You will also need to a clear workflow that will enable you to keep track of invoice issuing and checking customers who not making a payment in a timely manner. 

Unmonitored expenses

No matter how busy you are, you need to take the time to review your expense sheet. Are there any unnecessary expenditures? You will need to trim them as they ruin your monthly budget. Being attentive will can prevent you from committing any costly mistakes. Record-keeping helps you determine whether or not you are overspending. Monitoring your expenses also help ensure that your taxes and debts are paid. 

Miscalculating the cost of business growth

It is not easy to run a business let alone growing it. While growth is a sign that your business is starting to prosper, growth can be expensive and if you do not have a financial management strategy in mind, everything will fall to pieces. Planning in advance ensures that your business will be in the right direction. Operational mismanagement can also hurt your cash flow.If you want to optimise your customer service, make sure you have long term solutions. Avoid spending spree and while a growing company requires extra help, you will still have to keep an eye on your spending habits. Although you want to grow your business, it should continue to operate on minimal expenditures. With this practice, you are guaranteed of a healthy financial state. 

Setting unrealistic expectations

Most businesses believe that receivables come in constantly, and by embracing this concept, many businesses find themselves in serious trouble. While you cannot predict the future of your business, you can still control the direction it will take. There is nothing wrong with being optimistic about growth rates, but make sure these numbers are translating properly. 

Profit vs Cashflow: What Matters Most?

Profit vs Cashflow: What Matters Most?

If you are in business, making a profit is your primary objective. While you may have other motives such as gaining financial independence, choosing who you work with and selecting customers you are going to serve, running a business that produces profits makes a great difference. 

Making Decent Profits

Profits are essential to investing in your business. Expansion and investments will remain a dream if your business is not making a profit. It can be a challenge to maintain a profitable business, but if you want to keep the ball rolling, you need to stay ahead of the game. 

Profits provide you money to purchase assets and repay debts. A savvy business owner knows that you need maintain a steady profit to stay in business. This means hitting the minimum target on a monthly basis. Although profits are achievable, some businesses still struggle because of not pricing products correctly. You are on the right track if you are making sales and covering your expenses at the same time. 

Making decent profits is a sign that your business will last, but cash is also essential. The profits you make do not guarantee a steady flow of income because when there is income, there are also expenses you need to monitor. Cash flow movements are influenced by the payment of expenses, repayments of debt, collection of sales and many more. A cash flow crisis indicates that you are in trouble. Without a steady flow of cash, you will find it difficult to pay suppliers, employees and monthly bills. Meeting your financial obligations will become a challenge for you. If you no longer have cash, it will be impossible for you to stay in business. 

Maintaining Cash Flow

A healthy cash flow means you are able to pay your regular expenses and still have enough bank account balance for expansion. 

More often than not, a gap between receiving your revenue and paying your expenses can be financed by borrowing money from the bank. Considering the fees and interests in borrowing money, this option is expensive and can consume your profits. Business owners who are concerned about their cash flow will see to it that suppliers are paid in a timely manner. A good payment history will save you in difficult times. You can also negotiate payment arrangements and make sure you are true to your promise. 

Profits and cash flow are equally important. At the end of the day, you can go out of business if you do not properly handle your finances. A profitable business with a healthy cash flow can definitely stand the test of time.

3 Small Changes That Keep Your Financial Health In Check

3 Small Changes That Keep Your Financial Health In Check

For people who are not a fan of numbers, bookkeeping can be a daunting task. Taking bookkeeping for granted does not come as a surprise for business owners who do not have a proper bookkeeping system in place. Bookkeeping may only be a tiny fraction of your business, but it creates a serious impact on your financial when it is habitually ignored. Surprisingly, it does not take rocket science, but only some simple habits to ensure your financial health stays intact. 

1. Monitor your business expenses

It is easy to lose track of the money you are spending when you think that they will not seriously affect your cash flow. However, special events, travels and even lunches can accumulate. If you are going to check your tax records, you may be wondering why you have zero balance when you are only spending a minimal amount. Audit your expenses so you will know whether or not you are overspending. Aside from keeping financial details, you will also have to prepare audit. Making this a habit will ensure that you are not going to miss out any essential information. You will also have peace of mind as you know where money is spent. 

2. Put aside money for taxes

Delayed tax payment can result in incurring interest and penalties. Constant delays can affect your cash flow and instead of allocating money for paying your monthly bills, you end up using the money for penalties. The plan of expand your business needs to take a backseat as you need to prioritise tax payments. A simple neglect of tax payments can definitely hurt your business. Setting aside money for taxes can save you from these inconveniences and avoid paying unnecessary penalties. 

3. Track your invoices

As your business grows, you will need to monitor your clients including payments made and missed payments. Identifying the clients who have already made a payment and those who have not can be challenging without a bookkeeping system. When monitoring your invoices, make sure you have bookkeeping software that will be able to generate invoices and provide information of clients who have not yet made a payment. 

Techniques For Making Timely BAS Payment

Techniques For Making Timely BAS Payment

When it comes to managing your business, ensuring timely BAS payments is an obligation you just can’t afford to miss. Some business owners find themselves under the cashflow pressure, trying to make sure that they don’t delay payments. For small businesses, you can keep your compliance costs to a minimum if you opt for quarterly payment. However, you still need to be very careful when choosing your repayment plan and you should understand the risks involved.

How to lodge BAS payment with ease?

1. Set up payables account that can attract higher interest.

The bank account you set should also be linked to your transaction account via internet banking. Make sure the account obtains a higher interest rate than the account you use for your transaction. The money stays in your account for up to three months and this is considered a term deposit account. Make sure you have a separate account for your business and treat the account you set up as payables account only.

2. Ensure regular payables amount transfer.

Depending when bookkeeping is done, the bookkeeper should not forget to reconcile to the bank transaction listing as soon as the report is released. The report should include the total of your liabilities such as the GST liability, PAYG withholding payable, Superannuation payable and other payables that are applicable to your business.

You should ensure that the balance in your bank account is accurate. Which is why, the total amounts  indicated on the report should be for the current period. Your bookkeeper will inform you in case there is an Income Instalment Amount or also referred to as PAYG Instalment amount. If the Income Instalment Amount is present, it should be divided by the number of weeks in the quarter.

Once you have calculated the total amount of liabilities for that quarter, the next step you have to take is to transfer the amount to your payables account. Make it a habit to check your account’s balance every week. This is the best practice to follow as it prevents paying too many debts all at once. If necessary, top it up so you can ensure that the account keeps the exact amount you need when your payables are due. Complete your bookkeeping every month and make sure the amount for your payables are available.

3. Get the amount for your liabilities from the payables account you set up.

You can also get your payment for superannuation and BAS from the payables account you have set up. Make sure that the payable account’s balance should be in proportion to the amount of your liability to the superannuation funds and the ATO.

This simple and basic procedure can save you from incurring penalties and extra charges for delayed payments. You also ensure that your liabilities are separated from your business funds. Liabilities are considered debts that your business has already incurred and must be paid when they are due.

Your cashflow won’t suffer when you employ these basic techniques. When you have a payables account, you don’t have to worry when your liabilities come due. It will remain in your account until your payment schedule.

Small Business Owners Struggling With Bookkeeping

Small Business Owners Struggling With Bookkeeping

Bookkeeping, along with accounting is the language of business and it is the skill that every entrepreneur needs to master when planning to put up a business. There are several reasons bookkeeping should not be set aside even when your business is already doing well. 

Although it can be such a daunting task, it really pays off when you know how to keep your finances in check. Aside from helping you monitor your budgeting, bookkeeping will also help you lodge timely payments. Unfortunately, not every business owner has appreciated the benefits that bookkeeping provides. When success is within their reach, bookkeeping becomes a thing of the past. 

While some manage to cope with the demands of running a business, some just can’t keep up with it. For every business growth comes another opportunity for you to look at your time management skills and when you get sidetracked by other tasks, making bookkeeping the least of your priorities, you may need to redo how your business operates.

Common Mistakes That Small Business Owners Make

Trivializing budgeting 

When there’s plenty of room for advancements, budgeting your spending becomes trivial because you are solely focused on the more important tasks that you think are responsible for your business growth: selling or marketing. Bookkeeping is designed to keep your finances in check. It’s been created so you will have a full summary of your expenditures, income, sales and others. The business budget has four categories and these are fixed expenses, paycheque-allowance, prospective income and variable expenses. You should also set realistic balancing where you prioritize needs more than wants.

Unnecessary Expenses 

Doing some upgrades so you can improve your business’ quality of work is definitely a must, but you need to know the difference between spending and investing. When you invest, you are spending your hard-earned money on things that will allow you to reap long-term benefits. Expenses can either help you obtain current or long-term benefits. Focus on expenses with long-term benefits because even if you have spent much, you can be sure that these benefits have significantly outweighed the cost in the long run.

Underestimating Record-Keeping

Have you ever found yourself totally confused of your business’ financial expenditures? Maybe you are missing out on maintaining records and keeping all receipts? If this is the case, make it a habit to keep invoices in a safe place where you can easily retrieve them when needed. It can save you from losing important records and you will also be more aware of your expenses. It is recommended that you use bookkeeping software that gives you the ability to upload receipts. 

Failure To Separate Personal And Business Bank Accounts

When the money you used for business is the same as the one you used for your living expenses, losing track of your finances seems an easy thing to do. You might think that keeping both under the same account is a good way to manage your cash flow but the truth is, you can easily spend more than your credit limit because you think that you have steady cash flow. You have not prepared for the worst case scenario, which is going flat broke at the end of the month. The money that was intended for your living expenses have been spent on your business expenses. Not a good idea at all. 

Mistakes Business Owners Make With Their Finances

Mistakes Business Owners Make With Their Finances

Even if you are a savvy business owner, you are still not immune to making bad decisions. It is part of running your business. You need to make mistakes so you will know what to do the next time you are faced with difficulties in your business. If you learn from the mistakes you commit, you will be able to manage your business wisely. Perhaps, the biggest mistake that a bookkeeper can make is handling business finances. Many business owners have already failed because of taking their finances for granted. If you fail hiring the right bookkeeper, your business will sure suffer from its ripple effects.

• Ignoring Feedback

If you want to open a business, you should also be open to criticisms. Although nobody wants to be criticized, you need to be open to feedback and advice. You need to listen to what the bookkeeper has to say about your business because it is one way for you to run a better business. With these few simple changes, you will be able to realize that your business takes a more positive direction.

• Failure To Keep Receipts

If you have the habit of throwing away receipts, you can also increase the risk of losing track of your expenses. This practice can be dangerous because you do not have any evidence of the money you spent. As a result, you will face bigger problems once tax season comes. Make it a habit to save your receipts in a file or give them to your accountant or bookkeeper for safekeeping.

• Not Sticking To A Niche

Marketing can be expensive but it is essential to your business. This is why you need to spend your marketing budget wisely. With that being said, you need to make sure you focus on a niche that your product can successfully accomplish and satisfy. If you commit to a niche, you should only concentrate on the target marketing of your niche.

• Not Creating A Budget

It is easy to make adjustments if you have made a budget. You can easily monitor whether or not you are losing track. If you do not have any financial road map, you will be totally confused of the progress of your business and this could mean throwing your money away.

• Running A Business Without Sufficient Initial Capital

If you want the road to establishing your business to be smooth-sailing, you need to raise your capital so you can open your doors to better business opportunities. Before you open your business, make sure you have enough capital and see to it that you are conservative in your estimates.

• Not Hiring A Reliable Bookkeeper

A bookkeeper is crucial to every business as you cannot take on everything yourself. When hiring a bookkeeper, make sure that they are qualified and know more than just basic accounting. When you mismanage your finances, your business can take a nosedive. If you hire a good bookkeeper, you will be able to get good recommendations based on their experiences. As a business owner, it is important that you regularly keep track of your finances. Regular business monitoring can help you determine where your business is going. It helps you change your bookkeeping habits and become keen on your finances.

Keep Your Cash Flow Intact This Holiday Season

Keep Your Cash Flow Intact This Holiday Season

The Christmas and New Year are the best times to set new business goals for 2016, but you can instantly burst your bubble once you discover that your cash flow has also taken a holiday and there is no way you can materialise your business plans. Yes, cash flow is as equally important as other aspects of your business. Delayed payment collection process is one of the debilitating circumstances that can hurt your business in more ways than one. You can take a holiday all you want this Christmas, but knowing you have unsteady cash flow is enough to cloud your head with worries.

More likely than not, trade payments slow down during and after Christmas and New Year. Usually, payments are made in January, but since there are fixed business costs that need to be paid regularly, your business is most likely to suffer and your plans for the New Year will be completely forgotten due to financial constraint. When your cash flow also takes a holiday, it can be a bad start for your business. A slower cash flow does not stop your daily expenses from piling up. In fact, your business can face a cash flow shortfall if you have not paid much attention to the payments or lack thereof. 

Mindful strategies can get your business going and here are some ways you can survive:

Create a plan to profit: If you have not reviewed your cash flow experience of previous years, it is time you start doing it because preparing ahead of time can reduce the possibilities of cash flow issues especially during the holiday season. You need to prepare for the duration and size of the slowdown so you can still stick to your New Year plans.

Give priority to collections: Make sure you issue invoices promptly and send payment reminders, overdue notices and follow-up calls for overdue payments. This way, you can track your cashflow and avoid facing problems before the holiday kicks in.

Put stocks to better use: Christmas may give you a hard time controlling inventory levels, but there are ways you can still use unsold stocks such as selling off older stocks cheaply. This way, you can free up the cash intended for your on-going expenses.

Review your terms: The holiday is also the best time to assess your payment terms. Offer early payment discounts so you continue to improve seasonal cash flow. If there are large orders you can also negotiate full or part payments ahead of time. Try negotiating extended credit terms with your existing suppliers as well.

Put away some cash reserves: Learn to survive the holiday season by putting away some cash into a savings account with high interest as this allows you to gain flexibility when dealing with your finances. You can also consult with a professional debtor so you will know what your options are.

Christmas can bring a lot of challenges to business owners, but there are still ways to take care of your cashflow without breaking your business plans for the New Year. You just need to have mindful strategies so you can start the year strong.

Signs Of Business Fraud And Ways To Prevent Them

Small business owners consider embezzlement prevention as a challenge because fraudulent transactions are difficult to detect. Missing cash balances cannot be easily noticed until the amount has been recorded. Even blank cheques and fake invoices are proof that something fishy is going on, and both small and big businesses can fall victim to fraud. It can even go as far as inventing fake vendors on invoices so cheques can be issued to themselves. This is by far the most common way an employees steals from the company.

The transaction raises a red flag once you discover that the bank statement is in somebody else's name. Unfortunately, it is already too late to put a lid on the transaction as it has already been made.

There is a fine line that separates incompetence from fraud. This is why it is hard to conclude that the transaction that took place was indeed fraudulent unless it has been done habitually. For instance incorrect entries may appear as though the bookkeeper has been changing information, but at the end of the day you will realise that the bookkeeper just did not know the correct process. It is essential to know the telltale signs before jumping into conclusion.

Signs of fraud

If a bookkeeper is having trouble matching accounts payable and accounts receivable to your balance sheet, you may need to review the information on the report. You will be given many reasons why the report has not yet been updated. In fact, a bookkeeper may tell you that the reason for not providing an updated balance sheet is because of faulty bookkeeping software. This leads to running a report manually. When reports are generated manually, the process will take longer than usual and the information can be altered. Bookkeepers will also blame the software for failing to reconcile a bank account. These excuses should be a cause for alarm and you need to act on it by regularly monitoring business transactions.

Preventing Fraud

Although you cannot easily detect or prevent fraud, there are ways you can prevent them and one of which is by giving bookkeepers deadline for running a report. Reports must be ready after month-end and you should review them monthly.

It is also necessary to assign a different person for enter the bills and paying the bills. You can monitor where the money is being spent if you ask employees to attach cheques to the invoices. You must also sign your own cheques. Physical inventory also helps you check if there are suspicious transaction taking place. Your employees have to know you are monitoring every transaction.

Automation Helps Business Owners Avoid These Bookkeeping Mistakes

Many small businesses fail because of poor financial health, linked to inefficiency in bookkeeping and accounting.

For small businesses to thrive, budgets must be tightly rationed and this will only take place if bookkeepers are keen on monitoring the financial activity of your business. You might have already heard of modern bookkeeping, which involves automation. Some small business owners still shy away from the idea of automating bookkeeping tasks because it has been thought to be intended for large companies only.

Automation is for everyone. It reduces manual tasks and minimises dependency on skilled manpower. Embracing automation helps you avoid these bookkeeping mistakes:

1. Delayed account reconciliation

Reconciling your books with the bank must be done on a regular basis and in a timely manner. Delayed account reconciliation can become a prelude to larger bookkeeping mistakes. Automation enables you to reconcile accounts easily and highlight discrepancies before bigger problems arise.

2. Failure to track expenses diligently

Your cash flow is the lifeblood of your business. Every transaction must be tracked regularly so you will know how much you are earning and spending. Automation ensures all expenses are tracked.

3. Fraud

Human interaction increases the chances of committing fraud and this is what automation is capable of reducing. Since losses due to fraud can create a huge impact on the profitability of your business, automation will reduce the dependency of your business on human beings and the opportunity to commit fraud will also be reduced.

4. Inappropriate deductions

Not deducting sales tax from a sale is a mistake bookkeeping professionals often commit. This is a costly mistake because not deducting sales tax will display a higher amount of sales.

5. DIY bookkeeping

Another reason automation is critical to business processes is when you prefer to perform bookkeeping task yourself instead of hiring a professional bookkeeper to do it for you. Automation can assist you in ensuring that all of your business expenses are tracked and books are updated regularly.

6. Losing track of the money withdrawn

Businesses maintain a petty cash reserve in preparation for minor expenses. However, you can easily lose track of the money you withdrawn from this reserve, thinking that it will not really affect your cash flow. Running a business means keeping track of cash flowing in and out of your business. If you consider automated bookkeeping, you can easily keep track of these expenses and update your records regularly.

Financial Report: This is What Professionals Do

The financial report allows business owners to get essential information about the condition and financial performance of a business.

Being a business owner is not an easy task. You have to monitor your financial activity regularly and seize every opportunity to invest. However, these two important tasks will require prying into a financial report.

Bookkeeping is a task a business owner often avoids. Which is why they hire a bookkeeper to spare themselves from the headache.  Even if you already have a bookkeeper to deal with your financial statement, it does not mean you are off the hook.  You are a business owner. You need to know how things are going with your business. This means you should know how to interpret a financial report.

So breathe, clear your mind and read...

Known What To Read

A financial report contains a plethora of information. Since it is the summary of the health of your business, you will be presented with information you wish or you do not wish to obtain.

Decide what to read.

For instance, if you want to know whether or not your business is making a profit, read the profit and loss section. Allow your bookkeeper to discuss the strengths and weaknesses of your business before you proceed with asking for some sound recommendations.

If you wish to get a copy of the financial report's simplified version, you can ask your bookkeeper to provide it. However, you have to keep in mind that this shortened report will not give investors and investment managers a clear idea of your business.

Gain Basic Understanding of your Financial Statements

The balance sheet, income statement, and statement of cash flows are considered the core of your financial report. You cannot make sense of your financial statements unless you have a rudimentary understanding of your financial statement. If you know nothing about your financial statements, interpreting them will be a daunting task.

Check Profit Performance

You will know your business generates profit if it is making sales. It should also keep expenses which are less than sales revenue. Reading the sales revenue is the best place to start in determining the profit performance of your business.

Do you know the gross margin ratio of your business?

If you were to compare the current sales revenue with the previous year's, have the figures increased or decreased?

Compare Cash Flow From Profit

Cash flow is an important component of your business. It should continuously flow to maintain liquidity. Your cash flow will be used as your source of capital to grow your business.

You do not just make profit as you also need to generate cash flow. Cash is obtained from selling off some assets, borrowing money or getting shareowners to put money in your company.

Heed Signs Of Financial Distress

You will need to know how the solvency of your business looks. Do you still manage to pay your bills on time?

Analysing solvency involves searching for signs of financial distress. Failing to identify these signs can have a serious impact on your business.

Look For Any Possibility Of Fraud

Fraudulent activities can affect your business. It may only be noticed if the company is already losing thousands or worse, millions. If you are presented with a revised statement, you need to ask an explanation from your accountant or bookkeeper. All too often, restatement is due to the fact that the original financial statements were based on fraudulent bookkeeping or accounting.

Financial reports can be somewhat conditional, but it is an important source of information so investors are  informed about executive changes, economic trends, business takeovers and much more.

Five BAS Errors And Ways To Avoid Them

If you are a business owner, you are surely familiar with the process of preparing and lodging Business Activity Statements (BAS). When you prepare activity statements, do you think of it as a mere obligation you need to fulfill? If you do not have keen eyes on preparing these statements, you will have the tendency to open your doors to mistakes. Here are the common errors you need to avoid when preparing your activity statements.

1. Do not change your PAYG Income Tax Instalment unless you are advised by your bookkeeper or accountant

You might be having a notion that the ATO calculates your income tax amount in real-time, but they are working about one to two years behind. The path your business takes can also affect your income tax amount. If your business shrinks or grows, the first step you may take is to change or vary your income tax instalment amount. Before you vary your income tax amount, make sure you check with your accountant or bookkeeper. You can pay for fines and penalties for doing this.

2. Remember to lodge by the deadline

As a business owner, you need to take note of the important lodgement dates. For BAS, you need to lodge on the 28th day of the month and 28 February for the December quarter. You will get an extra month to lodge if you choose to lodge via a registered BAS agent. Be careful with late lodgement because the ATO will fine you $180 for each month that the BAS is lodged late. You can be fined for a maximum of five months.

3. Not reconciling your GST and PAYG back to the balance sheet

There are instances when you need to make changes to a transaction or tax rate but when a BAS has already been lodged, the changes will not reflect on the reports. You can only identify alterations if you compare quarterly reports to the balance sheet accounts. You need to engage the services of your accountant or bookkeeper to reconcile PAYG and GST.

4. Failing to identify whether your accounts should be on the cash or accrual basis

Once you register for GST with the ATO, you need to know whether you will be using the cash or accrual accounting method. In theory, a turnover of less than $2 million should select the cash method, but this may not always be the best option. For small businesses, the accrual method is the right choice to consider because it can assist with cash flow.

Bookkeeping And Business Growth

If you are business owner and hiring a bookkeeper has not yet crossed your mind, business growth will surely convince you of getting one. A bookkeeper provides clear-cut ideas that will put your finances in proper perspective. If you do not have a streamlined bookkeeping system in place, it will be difficult to grow your business because you do not have an idea of your financial activity.

The role of a bookkeeping professional in growing your business

•    Ensures that money is steadily flowing into your business: for business owners, cash flow is king. Without a doubt, cash dictates where your business is heading. If you have failed to keep your cash flow in check, you will incur unnecessary expenses, which can really hurt your business and deter you from moving forward. A bookkeeper prepares an invoicing system that will help you get customers to pay for the products and services you offered. A bookkeeper can also assist you with reducing cash shortfalls.

•    Helps you make decisions: bookkeepers are not the ones giving recommendations to business owners, but they play an important role in the decision making process. Bookkeepers prepare your financial report so you will know if your cash is still well-taken care of.  A bookkeeper is diligent when it comes to monitoring the progress of your business. You will also know if your business is ready for growth if you have a bookkeeper to provide you the financial statement that summarises your expenditures.

•    Handles financial issues: facing financial challenges are part of running a business and it takes a savvy bookkeeper to handle these challenges properly. A bookkeeper provides financial data analysis that lets you identify underlying issues that may be a deterrent to business development. It is easy to identify financial challenges before they get worse if you have a bookkeeper to help you track any suspicious activity such as payroll fraud.

If you are still clouded with doubt as you are worried about the expenses that hiring a bookkeeper may incur, think about the benefits they are able to provide. A bookkeeper can lead you in the right direction by ensuring that your finances are monitored properly. As you continue to work with a bookkeeper, you will realise that the benefits you reap outweigh the cost. Make sure you look for a reliable bookkeeper that can help accomplish your business goals. You and your bookkeeper should work as a team for you to achieve the results you want.

Four Questions To Determine The Financial Health Of Your Business

Do you keep track of your business’s financial health? One of the steps to take to find out if your business is doing well is answering some key questions. These questions will help you verify if there is a need for you to make some changes in your strategies. Assuming that your business is heading towards a positive direction can lead to a serious disaster as you do not have the figures to support your claims.

Are you ahead or behind on your monthly goal?

Hitting your monthly targets is one indicator that you are keeping your business on its feet. There are many ways to determine if you are ahead or behind on your monthly goals and one of which is comparing your month-to-date sales and expenses with your end-of-month goals. With this technique, it will be easier for you to identify if you are still on track.

Do you pay your bills in a timely manner?

It is also worth checking your accounts payable and cash balance. Just because a business is profitable does not mean there is nothing for you to worry about. Even profitable companies run out of cash. The good news is you can prevent falling behind of your payment schedule by ensuring that you keep an eye on both your major payables and monthly burn rate. This way, you will have the ability to pay your bills regularly.

Are you spending your money wisely?

Problems with your cash flow can have a negative effect on your business especially if you do not monitor your expenses. Make sure you closely monitor your monthly ongoing expenses and compare last month’s actuals to your projections. You will be able to generate valuable discussion once you keep records of your expenses.

Do you have enough cash?

It is also essential that you have enough cash to get to break-even as it is considered a major milestone that requires regular monitoring and adjustment. Some of the important things you need to close track include your net profit and business plan projections. You will be able to get a better picture of your business’s trend review your financial statement. One of the ways you can raise money is by cutting your expenses.

Answering these key questions will help you determine which direction your business will take. There is a big difference when you are completely aware of your financial standing because if you decide to grow your business, you can sleep soundly knowing that your business is on the right track.

The Importance Of Profit In Business

There is a risk involved in running a business. Making a profit is a reward for the risk that business owners have bravely taken. While making a profit is not just the only goal of every business, it is one reason a business operates.

The importance of profit:

1.    Efficiency indicator: One of the ways to measure the success of the business is to check the profit it has earned for a given period of time. Profit is considered as a yardstick that determines the business firm’s efficiency and earning capacity.

2.    Survival: It will be impossible for a business to survive without earning sufficient profit. Business owners consider profit as a source of income and it is also used for paying business expenses, salaries of employees and even buying raw material. Your business does not have a chance to survive if it is no longer earning a profit.

3.    Motivation: When you see your profit increase, you will be more motivated to strive harder and take risks. There is a direct relation between profit and risk. When the risk is higher, the profit is also higher.

Ways to improve your profit

Reduce your cost:Minimising direct costs can have a positive effect on your profit. This can be done by negotiating with your suppliers to lower the process or reviewing the processes and systems. Instead of sticking to the same supplier year after year, it is important to explore other options that can help your business minimise expenses. When you improve your procedures and methods by ensuring that they are systematic. Good systems help you prevent errors and save time and money.

Focus on profitability:Although increasing your profit may not only be your priority, it is worth focusing on profitability as it has a dramatic impact on other aspects of your business. Employees must also be aware of the importance and role of profitability in your business. Ask your bookkeeper and accountant how you can ensure you are monitoring the right indicators that will give your business a boost. When it comes to your team, make sure productive employees are rewarded because great pay is linked to effectiveness.

Make continuous improvements:Anticipating problems and adopting technologies that can enhance your company’s ability to make continuous improvements will do wonders on your profitability. Good planning is important in achieving your goals and making improvements. When measuring the effectiveness of your plans, set measurable targets and review your performance as a team. You are on the right track if you see improvements on your system.

Improve your turnover:Some of the known techniques that can increase your turnover include focusing your efforts on profitable customers, keeping your services or products up-to-date and maximising the value of your sales.  It has also been proven that businesses actively selling their products instead of just taking orders have increased their turnover and more likely to survive.

How To Keep An Eye On Your Cash Flow?

Business owners often neglect cash flow without realising its importance. There are businesses that fail to survive because of poor cash flow management. Although it does not take a large chunk of your business’ financial aspect, it will still have a negative effect once you do not pay serious attention to it. Bookkeepers and business owners need to work hand in hand to maintain a balanced cash flow.

There are two kinds of cash flow: negative cash flow and positive cash flow. Negative cash flow occurs when incoming cash is less than the outflow of cash. This only means something is wrong with the way you handle your cash flow. Positive cash flow occurs when the cash flowing into your business is greater than the amount of cash leaving your business such as salaries, monthly expenses and accounts payable.

It is also interesting to note that profit does not necessarily equate to cash flow. There are other financial figures that must be factored in before cash flow can be obtained such as inventory, accounts payable, capital expenditures and debt service. When it comes to cash flow management, a business owner needs to be focused on the drivers of cash. It is not enough that you concentrate on profit or loss because you also have to know what happens to your cash.

However, a business will not generate profits without a positive cash flow. You need to have enough cash so you can pay your suppliers and employees. A positive cash flow will only occur if you structure your business. Structuring your business will involve planning in advance and making sure that you avoid unnecessary spending.

Ways To Improve Your Cash Flow

Collect receivables:  receiving and processing your receivables can still be improved when you ask customers to preauthorise checks. This way banks will have the ability to draw against their accounts following timed intervals. It will also be a good move if you ask your customers to pay using depository transfer checks as this is a cheaper type of fund transfer. Another way to encourage timely payments is giving discounts to those who were able to pay their bills quickly.

Tighten credit requirements: although it is common for most businesses to extend credit to their customers, it is also necessary to determine the risk of extending credit. You may need to take a few things into consideration such as their ability to repay the money they owed. Check some references and accept credit cards. Although it may cost you a percentage, it is still a safer bet for getting timely payments.

Increase sales: attracting more customers is an effective way of getting more cash. However, there might be some challenges in selling your goods but you can make more sales by selling cheaper goods to existing customers.