When you start a business, you might hope that all you need to do is ensure that you’re drawing in the customers and your cash flow should always stay healthy. That’s not always (or even often) the case. Many businesses are making missteps that might seem minor in the moment, but those errors can build up to the point that you’re losing much more money than you’re bringing in.
All those little expenses are adding up
One of the most common flaws in small business accounting is simply failing to keep track of everything. When expenses build up without you paying attention to them, it not only throws off your understanding of your finances but it can stop you from taking the tax breaks you’re otherwise benefitting from. Thorough record-keeping is crucial and that includes learning to account for every expense, no matter how little. With tools like Concur expense tracking, it becomes much easier to streamline the process and always know exactly how much you’re spending.
The business is using resources it doesn’t need
You and your employees’ expenses aren’t the only places your money is going to go, of course. Waste of business resources can become a long-term drain. In retail and manufacturing, buying too little of a product can leave you unable to keep your momentum, but it can cost just as much to get too much. Storage, especially if it involves HVAC, cooling, and maintenance, costs money. Similarly, taking the steps to making your business paperless (at least partially) can drastically reduce the costs involved with printing, copying, transporting, and storing paper.
You don’t have as much coming in as you should
For some businesses, ensuring you get your money is simple. The customer pays at the time of the transaction. For businesses that deliver services or goods over a long period of time, it’s more likely you’ll be using invoices. Here is where a lot of businesses miss out. By automating the process with software such as Salesforce invoicing, you ensure that you never miss an opportunity to get the money you should be. Keeping records of those invoices also allows you to know when a customer hasn’t paid yet and whether you should send them a reminder. Invoice factoring can help you keep your cash flow steady using loans, but it does involve losing a little of the money you might otherwise make.
You’re not considering ROI
This is one of the most important skills to learn when it comes to managing business finances. When you spend money, you have to make sure it’s going to the right. Figure out which investments are right for your business by considering the return above all else. Sure, you might like a fancier office, but how much revenue does it have a potential to bring in compared to launching a pay-per-click advertising campaign?
Businesses need a keen eye on the accounts. On what goes in, what comes out, what can be better spent, and where you’re spending needlessly. Hopefully, the look at the few principles of smart accounting we’ve explored above helps you get a better grasp on your own.