As a business owner, you may occasionally struggle with managing your finances, but it doesn’t have to continue to be that way for you and your company. With the right strategies and a little effort, you can take control of your business finances and improve your bottom line. Read on for six tips for better managing your business finances and helping you get your finances in order.
Keep track of mailed checks
No matter how careful you are with your checkbook, some checks may get misplaced or lost in paperwork. A virtual PO box address is a great way to keep track of mailed checks and other essential documents.
That way, you’ll know if the check gets lost in the mail before it reaches its intended recipient. Keeping track of mailed checks will help you avoid unnecessary fees from overdrafts or bounced checks. Plus, it will give you extra peace of mind.
Organize your financial documents
It is a necessity to keep track of the financial documents for your business. Keep your financial documents in one place and ensure you organize them by date. That way, if you need to find a receipt or invoice quickly, you’ll be able to find it easily. Key documents to track include:
- Balance sheet
- Cash flow statement
- Profit and loss statement
Choose an accounting method
There are two main types of accounting: cash basis and accrual basis. Small businesses that don’t keep track of their inventory and expenses very closely use cash basis accounting. Large corporations with more complex financial transactions use accrual basis accounting.
Cash basis accounting is simpler to manage and understand, whereas accrual basis requires more in-depth record-keeping. It is important to do research into both options to find out which one works best for you.
Perform a cost-benefit analysis (CBA)
Cost-benefit analysis (CBA) can help you make informed decisions and use resources more efficiently. It compares the costs and benefits of different options, so you can decide whether to invest in activities like advertising or scale back on expenses such as employee salaries or office space.
You can measure costs, and you can measure benefits in terms of money alone or other types of benefits such as improved health or social benefits. The analysis may also include external costs such as pollution or traffic noise caused by the project you are evaluating.
Follow accounting best practices
The financial statements you use should reflect the nature of your business and its operations. You should also follow generally accepted accounting principles (GAAP) when preparing your financial statements. These include:
- Use double-entry bookkeeping
- Keep all records for seven years
- Use accrual accounting methods
- Have an accountant or bookkeeper help you with your books
Maintain good credit
Do not let yourself get caught up in debt. While this is easy to say, it can be much more difficult to implement in your business. Yet, if you can, you will save thousands of dollars by not paying interest rates. Maintain a good business credit score by paying bills on time and staying on top of the credit reporting process. A good credit score can help you secure better financing and loan terms when you need them.
It is also crucial for business owners to know how much money they spend each month on various items such as rent and utilities. Make sure you do not overspend on these items because this could lead to trouble when your debt starts piling up. While there are complex accounting softwares that larger corporations use, many small businesses can get by using programs like Microsoft Excel. If you do feel out of your element in this facet of your business, you can always hire an accountant as well.
Parting shot
Managing your business finances is essential for the long-term success of your business. It doesn’t matter how well you run the rest of your business, if you do not take care of your financial responsibilities, eventually your business is going to fail. Yet, there is a myriad of information available to you online that will help you run your business more effectively. Following the tips outlined above, you can stay on top of your finances and keep good business credit.
