5 Crucial Finance Tactics Every Small Business Should Be Doing
Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones. – Benjamin Franklin
If you’re a business owner you have a vested interest in your finances that no employee or outside consultant will ever have. As a business owner, take the responsibility for developing and executing tactics that will keep your business financially stable. Many business owners focus on growth and fail to pay attention to their business’s financial operations. How your business financially operates will determine its future growth or slow demise.
After working more than twelve years in corporate banking, I can assure you that it’s the proficient operations that keeps a successful business on top. What the public sees everyday is the extensive advertising and marketing that big businesses spend, but what they don’t see is the daily process of how the big businesses run their operations. There are many different financial factors that every business (big or small) will face. Even if you’re a small business owner you can still execute these factors the same way big businesses do. I’ve thought of five financial factors most small businesses face that affects their bottom line, and offered tactics you can incorporate to get the best results.
Here’s 5 crucial finance tactics small business should incorporate in their daily operations
1. Tracking Assets
Business asset tracking is needed to establish value for accounting purposes and to help manage the allocation of resources. Accuracy is extremely important. A good tracking system allows you to locate information about any asset quickly. This will ensure proper depreciation of the asset, as well as tell you what assets need to be replaced or upgraded. If you’re using an accounting software be sure to enter purchased assets immediately to be sure the date, value and description is correct. If you do not use accounting software, create a Fixed Asset Spreadsheet of items you want to depreciate. Each month these items will show on the Balance Sheet Report prepared for your business.
2. Tracking Expenses
If you need to make large business expenditure, a review of the income and expenses for the last several months will help decide if the purchase can be made now or put off for later. When it’s time to do your year-end taxes, a detailed list of your expenses will make it easier to identify which tax write-offs your business qualifies for. If you’re using an accounting software be sure to enter expenses weekly or monthly. If you do not use accounting software, keep a spreadsheet log of your monthly expenses. Scan receipts and file them in a cloud based folder by category and month. Store the original hard copies in a binder for easy reference.
3. Scheduling Invoices
Revenue is what keeps your business alive. Keeping a steady cash flow is vital to your survival. Developing a billing process is a must. Set a date (preferably at the beginning of the month) that you will send out invoices to customers. Customers who receive invoices at the same time every month are more likely to be prepared for it and pay faster. Keep in mind that once you send the invoice it important to track your billing until payment is received. You may also need a process for sending second notices and making follow-up phone calls. Using an accounting software will allow for easy distribution, research and receiving of payments.
4. Recording Deposits
Your average business has one main source of revenue that generates deposits to the business account. Although it may derive from a variety of services or products, it all counts as income. However, there are bank deposits such as a loans or transfers that should not be counted as income. If these deposits are not recorded separately from income, your profit & lost statement will be incorrect and at year-end you possibly could pay taxes on more money than your business actually made.
5. Paying Taxes
Be sure to keep a record of tax deadlines on your calendar, and allow sufficient time to prepare so payments are made by the due date. The IRS can levy penalties and interest for not filing quarterly tax returns on time. It’s suggested that business owners set aside a certain amount of money throughout the year to pay taxes to keep from being in a money crunch every time quarterly taxes come due.