Chances are you didn’t launch your business out of a burning ambition to spend hours sifting through financial data. Nonetheless, if you don’t keep on top of the finances, there may come a day when you won’t be able to enjoy any of the things you love about your business.
Devoting a portion of each day to checking up on your finances prevents any nasty surprises, as well as a mountain of work come the end of the financial year. Here are some tips on how to stay consistent when it comes to business accounting.
Recognise Technology as Your Friend
If you’re not already, get up to speed with all the features of your online banking account. Make sure you have secure, cloud-based document storage for things such as invoices and bills. Most importantly, invest in some good accounting software. A user-friendly product, such as QuickBooks Online, can convey a wealth of information in a matter of seconds, such as how much money your business is owed by customers and how much it owes suppliers and contractors. It will also highlight any of your invoices that haven’t been paid in the agreed time. This can alert you to the need to chase up the relevant clients, thus lessening the chances of cash-flow issues blowing up.
Read more about unpaid invoices: Following Up Unpaid Invoices.
Educate Yourself about Financial Terminology
Sir Richard Branson somehow managed to build several business empires without understanding the difference between gross margin and net margin. (He belatedly had it explained to him by an employee at age 50). If you’re the next Branson, you can perhaps get away with that kind of ignorance. But you’re going to be more motivated to check your accounts if you can interpret the raft of figures being served up.
For example, you may be inappropriately upbeat or concerned about your current assets if you’re not aware they equal your equity in your business minus whatever liabilities that business has.
Read more about financial terminology: Accounting Terminology Explained.
Turn Data into Information
Knowing that Client X owes you Y amount of money isn’t in itself of particular interest. However, knowing that a major client has suddenly stopped buying as much or that a previously insignificant client is progressively increasing the amount they purchase is intelligence a business owner can leverage.
The beauty of checking the books every day is precisely that it yields nuggets of information that can be acted upon before it’s too late. If you’re having trouble motivating yourself to review your financial data, ask yourself whether you’d prefer to know immediately or at the end of the quarter that your most loyal customer is drifting away, or your biggest supplier has upped their prices by 20% without alerting you.
Checking the finances is unlikely to become one of your favourite tasks. However, given modern technology, it’s something that can now be done relatively quickly and painlessly. If you can get into the habit of doing it daily, you’ll enjoy peace of mind knowing exactly what shape your business is in at any point.