When you first start your own small business, you have a wide variety of concerns and tasks that are all competing for your attention. Of course, this trend will continue as you work on growing and expanding your small business and bringing in customers. Often, this division of your attention can lead you to focus less on your small business accounting tasks than you probably should. This can be a serious problem for your small business if you do not know what to look out for in your accounting and bookkeeping. Get to know some of the small business accounting tasks that you need to keep up with and what you need to watch out for so that your business remains successful for as long as possible.
Actual and Projected Cash Flows
As a small business owner, your main focus is always on bringing in as many customers as possible and making money that will help you continue to grow your business. Because of this, your daily records of cash flow are extremely important. Cash flow refers to any money coming into the business, whether through physical cash, credit card payments, or checks.
You should keep meticulous daily records of how much money is coming into your business both in total and by each form. Skipping this daily accounting can cause you numerous problems in your small business including loss of income and even internal theft by employees.
In addition to your daily records, you will need to pay attention to projected cash flows for your business. This is where your small business accounting can get a little tricky. Projected cash flow calculations involve your current cash holdings, your needs in the weeks and months to come, and the expected payments you will receive.
Often small business owners have a difficult time generating these future-based numbers. If you are such a person, you can hire a small business accountant to sit down with you and look at your past and current cash flows, your cash needs in the immediate future, and any payments you are expecting to receive. They will generate your projected cash flows so that you have a goal to look at for the next few months.
Review Your Accounting for Short and Extended Time Periods
A mistake that many small business owners make is not looking at the big picture of their finances as well as the small picture. For example, they will look at their profits for a week and celebrate because they made more income than the week before. However, if they do not also compare the current week to the same time the previous year or compare one month to another, they may miss a bigger issue.
In order to avoid this pitfall, you will want to review your accounting based on both short and extended periods of time. Weekly accounting reports should be looked at and considered as well as monthly, quarterly, and annually. This will give you a more comprehensive view of your finances and help you to make smart business decisions going forward as far as staffing, investments, and the like.
If, for example, there is a time during the year in which business always slumps, you can look into why that is. Perhaps you need to increase your marketing during that time period. Or it could just be that it is not the right season for the merchandise or services you are selling. You can adjust your business model for that time period accordingly to minimize profit loss and maximize gain.
Now that you have a few ideas of what to watch out for in your small business accounting, you can better manage your business finances now and in the future. Always remember to take into account both the small and big picture and to consult a professional small business accountant at Bliss & Skeen CPAs if you feel like you are in over your head.