It’s no secret that bookkeeping is a task most small business owners enjoy the least and it often falls to the bottom of the to-do list. With many demands on your time, it’s difficult to fit it in (these bookkeeping tips will make things a bit easier for you). While the process of recording revenue and expenses may feel tedious, timely and accurate bookkeeping provides valuable information that will help you manage and grow your small business. Let’s explore how and help you get the most out of your bookkeeping.
- cash flow management – this is critical for the success of any business since it involves strategies to avoid (or survive) shortfalls and it’s only possible if you have up-to-date and accurate financial records. At its simplest, cash flow management means delaying outlays of cash for as long as possible while encouraging anyone who owes you money to pay as quickly as possible. Regular invoicing (one or two times a month), managing accounts receivable and paying invoices close to, or on, their due date are all examples of good cash flow management.
- expense management – bottom line growth can be achieved by increasing revenue and/or reducing expenses. Regular reviews of your income statement are important for understanding your business expenses and identifying any potential areas for saving.
- monitoring results and measuring performance – financial statements provide a summary of all the relevant financial information of your business. Financial analysis can then be performed on these statements to provide you with a more detailed understanding of the financial health and performance of your business. Issues such as liquidity (does your business have enough cash to pay its debts on time) and profit (the percentage of net profit to total sales) are part of the financial analysis of your business that will put the information from your financial statements into perspective. Comparisons to budget and prior will year enable you to gauge your businesses progress. Timely review will help you identify problems, implement the necessary corrective actions, and improve your operations.
So next time you finish entering the revenue and expenses of your small business, take a little bit of time to review the financial statements and reports to make the most of your bookkeeping.