Finance is an easy thing for small business owners and managers to overlook. If you’re like most, you’re putting out fires or supervising employees, focusing on sales, conserving energy and updating your web site.
These are all valid concerns.
All businesspeople need to daily focus on two areas: internal and external matters.
Externally, your marketplace – sales and marketing initiatives – are daily concerns.
Internally, financial matters are paramount as well as operational efficiency, employee performance and customer service.
Being defensive is a key for you in small business finance – making sure your technology, bank accounts and bookkeeping are secure and in the best-possible shape.
1. Do whatever you have to do to stay confident about money
Confidence is important. You must feel financially secure and be compliant in taxes. Strategize on accounting software and whether to get expert help.
You should always have immediate access to your financials.
And keep your personal finances separate from your business.
2. On a daily basis, check your bank records
Use accounting software to download bank transactions each day. It will help you in monitoring your funds, check for fraud and help to generate reports.
Each day, make absolutely certain to match your cash deposits with the cash receipts on your bank statement, and daily match your disbursements.
Be sure the dollar amounts and payee names are accurate. That goes for checking of potential unauthorized payments.
3. Use Bookkeeping to Track Performance
Budgeting and revenue forecasting are important. You should be tracking your performance against your plans.
You should always know what you’ve done and where you’re going. On your calendar, schedule regular times to perform thorough reviews of your financials.
4. Lockbox processing
Lockbox processing can save businesses time and money. Many companies use it when they get a high volume of customer payments.
But there are pros and cons in lockbox processing.
Payments are sent to bank P.O. boxes where the payments are processed and deposits are recorded to the companies’ accounts. In turn, the banks forward records of the transactions, which can be downloaded to company software.
But lockbox processing requires trust in the financial institution. It can be risky if bank employees aren’t trustworthy. The risk is potential fraud such as in counterfeiting of checks.
5. Make certain all paperwork is finished before new hires start
Immediately give new employees the necessary paperwork to complete before they start work.
6. Classify your employees correctly
Whether you have full-time, part-time or contract workers, classify them correctly. If you don’t you’re inviting a host of expensive and time-wasting problems with the state and federal government.
Incidentally, if you want maximum profit, consider partnering with your employees partnering with your employees.
7. Apply and collect taxes right away
Document payroll taxes when you pay employees. Account for sales taxes immediately. Pay estimated taxes on time.
8. Credit screening
If you’re providing services use a retainer model. Get paid in advance by requiring a retainer payment.
Otherwise, avoid the migraine of having to recover bad debt by getting payment upfront.
If you’re shipping product on credit, do a credit check. Buy software that screens customers. Put a hold on any shipments if they have dubious credit.
9. Reimbursement of employees
Avoid the potential of errors in reimbursing employees for entertainment and travel expenses.
Automate the process by utilizing an electronic entry system. It will pre-populate the data as employees scan their receipts. This will also save time.
You must also know when to properly pay overtime for commutes and travel.
10. Standardize chart of accounts
Don’t allow employees to code invoices. Insist employees use the same account numbers.
11. For projects, establish separate coding
Whatever your projects, be sure to establish individual line items. You’ll be able to generate reports and pay bills accurately and promptly.
12. Take advantage of Section 179
Section 179 of the IRS tax code affords tax deductions. This is to motivate businesses to invest in assets for company growth and tax savings.
13. Hire a professional payroll service
Due to the complexity of payroll processing, consider outsourcing. In this way, you’ll ensure accuracy and prevent risks.
But don’t give any funds to a service. Only hire a service that does the numbers-crunching. Why? There are thousands of search results for “cloud payroll service fraud.”
To avoid costly mistakes and issues with the Department of Labor or the Internal Revenue Service, it’s best to review payroll processes.
14. Have a quality document management solution
To keep your expenses, payables, receivables, receipts, and invoice documents organized and streamlined, invest in a quality document management solution.
This will cut down on the time in reconciliation.
If you have an accountant, make sure it’s compatible with your outsourced accountant. If you don’t, your accountant will charge you extra to manually enter the numbers.
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“Money is the best deodorant.”