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Financial mishaps can be directly linked to small business failure. Despite the amount of love and passion that goes into your business, bookkeeping is essential for small businesses to manage cash flow and financial health.
Whether you are new to bookkeeping or want to understand how you can help your bookkeeper stay on track, the following 6 items are financial fundamentals for small business owners.
Transactions
Every transaction that occurs within the business needs to be accurately recorded. All revenue and expenses need to be clearly detailed; and ensure your personal transactions are kept separate to avoid confusion.
Cash
Small business transactions that are paid through petty cash should be recorded in detail, so that they can be allocated to the correct account when entered. This is essential to accurately record the number of expenses your business incurs each year.
Inventory
Keep accurate records of your inventory, noting purchase times, purchase and selling prices, sell dates and stock numbers throughout the year. This will allow you to track trends throughout the year so that you can order extra stock when you deem it necessary. Otherwise, additional stock in holding is merely cash tied up for your business.
Debtors and creditors
This is probably the most basic finance tip, yet small business’ can become complacent in their practices, vowing to catch up next week. You cannot afford to be complacent when it comes to accounts receivable and payable. Be sure to stay on top of what customers owe you, and when the payment is due to keep a healthy cash flow. It is equally important to keep track of debt you owe others, keeping in mind that payment terms differ from business to business.
Employees/payroll
The process of hiring an employee, paying their wages, worker’s compensation and also their superannuation can be a difficult process, so ensuring you understand your obligations is essential. For small business owners, it is a good idea to seek professional help when hiring employees to ensure you are meeting your obligations.
Prep for tax time
By sticking to the above tips and keeping great records or your debtors and creditors, you should be ready to ace tax time! Let this be a motivator for during the year, knowing that staying on top of your records is easier than trying to figure it out at tax time.
Maintaining these basics as a standard practice will help to keep on top of all your finances and make your (or your bookkeepers’) life much easier at the end of the financial year. With all these tips in mind, I wish you the best success in your business endeavour.
If you want to know more about Verve Group’s bookkeeping service, email contact@vervegroup.com.au and we can let you know about ways you can save time and outsource the bookkeeping headache.