Every year, numerous small businesses fail – not because they had a bad business nor for lack of business, but because they didn’t take the time to control their finances. If you want to survive in today’s economic climate, you must have financial information that tells you if you are making money, which expenses are out of control and which products are selling. Financial Statements are not a tool to keep accountants in business, they are a management tool designed to help you run your business. Here are a few financial tips:
Determine whether to use the cash or accrual accounting method. Under the cash method, you record income and expenses during the actual year you receive and spend the dollars. The accrual method requires you to record income in the year it is earned and the expenses in the year they are incurred.
Choose a bookkeeping system, whether it be QuickBooks, Sage or another – find the one that works for you.
Get the help you need. If you don’t have the time or expertise to manage your books, hire a bookkeeper, or have a para-professional from your CPA firm assist you.
Organize your records into a filing system which will help you keep all your financial information, including: sales receipts, purchase orders, bank statements, paid invoices, etc.
Prepare monthly financial statements so you know how your business is doing. These are a must for a bank loan.
Use your financial data to tell you what is profitable and what is not; use it to plan your cash flow.
If this seems too overwhelming, talk to your CPA. Although the cost of financial help may seem high, you cannot afford NOT to manage your finances.