According to the Small Business Administration in US, almost half of newly-established companies fail within their first five years due to poor financial management. While it’s a no-brainer that companies must keep track of their financials, this data gives an overview of how important this task is in ensuring the survival of any company. It also doesn’t help that errors in your financial records and transactions can incur worse problems within your company.
Fortunately, there are effective ways to mitigate financial inaccuracies. To help you manage your financial records better, here are some techniques you can incorporate in bookkeeping.
One of the common mistakes that business owners, especially sole proprietors, make is lumping all expenses and income into one account. This makes it a lot harder for accountants and bookkeepers to effectively monitor where the money goes. Thus, it’s best to separate personal transactions from that of your business’s. In this way, it’s easier to spot irregularities and inaccuracies on your company’s financial records.
Putting off bookkeeping for a long time may end up resulting in problems such as overdue invoices, bounced checks, and many more. This is why it’s vital that you constantly update your books to prevent these errors from materializing. As much as possible, go over your financial records every week to ensure that all information is correct and up-to-date.
Updating your books is one thing, but ensuring there are no errors in your financial records is another. This is why financial audits should be done from time to time. It’s important to balance your sheets and cross-examine expenses to spot financial inaccuracies quickly.
There are times when companies neglect settlement of bills and invoices due to poor financial management. However, this can affect daily operations in your office, especially if the invoices in question are that of utility’s. In addition, there’s also a possibility that costs will accumulate into bigger expenses. The inclusion of late payment fees may actually deter smooth cash flow within the company as well. This is why it’s important to keep track of invoices and prioritize settling them. In this way, you prevent these kinds of inconveniences from occurring.
Nowadays, most companies rely on an accounting software to keep track of their finances. While there is nothing wrong with automating, it’s still vital that you understand the significance of keeping financial documents filed and stored properly. This doesn’t just give you a back-up of your transactions, but also gives you a way to backtrack and examine your books and records better.
In the business industry, major expenses are something that is unavoidable. This comes in the form of facility upgrades and many more. Fortunately, these things can be scheduled. So instead of scrambling around for funding when the time comes, it’s best to mark these kinds of endeavors on your calendar ahead of time. In this way, you can prepare funds for them within the given timeframe.
Today, it’s no longer uncommon for companies to hire a third-party organization for bookkeeping and accounting services. In fact, it’s considered as an effective approach in financial management as business owners can focus on other aspects of their respective company. In addition, working with a third-party service provider prevents employee frauds and in-house discrepancies.
Without proper financial tracking, the success of a company is deterred. This enforces the need for proper bookkeeping and accounting. But admittedly, this also makes the idea of financial management a tad bit scarier than it actually is. Nonetheless, enforcing simple bookkeeping techniques like the ones listed above can help alleviate this burden by making financial processes easier to handle.