If you have had a less than pleasurable or informative experience with your bookkeeper or accountant in 2015, now is a good time to take action and make changes for a better 2016. Here are 5 tips to get started:
1. Keep things separate. Handle your business and personal accounts as independently as possible. If you think personal expenses may qualify as a business deduction, mark them accordingly in your financial software or spreadsheets.
2. Call in a pro. Hire a bookkeeper or accountant that has some familiarity with your industry (i.e. retail, construction, professional services). Use your financial professional wisely. You are not paying someone north of $75 per hour to do data entry; you are paying them for guidance, compliance, and peace of mind that your financial house is in order.
3. Pencil it in. Set aside about 30 minutes every week – that’s the equivalent of just one or two Facebook visits every seven days – to organize your finances, and don’t let other things take priority during this time. You’ll have more insights into your business, be able to make more informed financial decisions and have everything organized when tax time approaches.
4. Consider your people. When you’re looking for insights into your business spending, don’t forget to properly track what is likely your biggest expense: labor. Whether you’re paying a full staff or you’re the only one on the payroll, make sure you’re tracking the costs of wages, benefits, overtime, and any other costs associated with labor. By tracking your spending on labor, perks, and benefits, you may find you have more money to incentivize your employees, or that you’re blowing your desired sales-to-revenue ratio out of the water.
5. Don’t forget to get paid. If you’re not keeping proper records that you can make sense of at a glance and measuring accounts-receivable aging and cycles, it could be months before you realize this is the cause of your giant cash-flow problem. You could be collecting payments late or missing some altogether. Make sure you’re properly tracking all payments due and recording when each invoice is paid, how long customers generally take to pay, and which customers you’ve had difficulties collecting payments from in the past.