Staying on top of recordkeeping and finances is often one of the biggest challenges for small businesses. If you’ve just launched your venture, are in the early stages of operating your business, or are still the sole employee of your startup, then it’s especially challenging.
There are often many competing priorities. You may feel driven to invest in the marketing costs and efforts associated with business development to get new clients or advertising to connect with customers if you don’t have enough interest in your services or products to feel secure yet. Or you might have the opposite problem: too much interest in your services or products, and you’re racing to keep up with orders and complete projects or produce enough product fast enough to a sufficient level of quality. It’s easy to let the paperwork get behind, telling yourself that you’ll set aside some time to square up accounts and update the records tomorrow, or next week, or next month after this project is out the door, or that holiday has passed and the demand ebbs.
However, there are significant costs to letting yourself get behind on accounting. You lose the ability to stay on top of your overall financial wellbeing if you can’t keep accounts up to date, and it’s dangerous to rely on mental arithmetic to make business decisions. You may find yourself without adequate funds to pay staff or suppliers, or paying high penalties for missing a loan or credit payment, or hit by huge tax bills if you don’t stay on top of the payments throughout the year.
Even if you set aside time for regular accounting, there are lots of little things that can get missed when you’re trying to do it all yourself, and those missed opportunities can add up to significant sums over time. There have been many instances of financial institutions and other large companies taking missteps, and an experienced finance professional keeping a close eye on your accounts would be able to alert that a Barclays PPI claim was available to reclaim funds on a loan or credit card, or that a mystery charge had gone through and should be reversed.
Even if you’re operating as a sole proprietorship with no additional staff, it’s worthwhile considering outsourcing your finances to a professional. It frees up your time for the things that only you can do while guarding against oversights and mistakes. If you want to do all the accounting for your small business yourself, or even have a part-time or dedicated employee in-house take care of it, you’ll need to set aside time to deal with finances and guard that time religiously.
Put it as a recurring item with an alert on your calendar. Block it out so that you can’t overbook it with appointments or other commitments. Make access to recordkeeping systems as convenient as possible so that there aren’t barriers to keeping great records. Technology has come a long way in this regard, and there are some excellent apps for capturing and filing financial information quickly and in a way that gives you intelligent, detailed records for the future. However, even if you use a simple Excel spreadsheet to keep track of income and expenses, be sure to pin that file somewhere you can access quickly, or leave it open in the background and put in new sums as soon as they come in.
Build reporting dashboards for yourself, or hire someone to do this, or use an app that offers this as a built-in feature. You need to have at-a-glance, continuously updated metrics to run your business properly. At a minimum, you want to know the balance between incoming funds (gross income) and outgoing funds (expenses) to make sure that you actually have a positive balance (net income/profit). Ideally, you probably need more detail such as a projection for the future to make sure that bills coming due are offset by planned work.
Getting your finances on track comes down to these two things: continuous (meticulous) recordkeeping and accurate reporting that you actually use to make decisions on. You can set aside the time to maintain finances and review them regularly yourself, or you can hire an employee or a consultant/agency to handle them for you, but either way, you will need to be involved at a minimum by making sure that source documents (bills and receipts) make their way to the correct party and by reviewing the reports and using them to influence your management decisions.
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