Archive for the ‘Business Financial Planning’ Category
The Importance of Keeping Proper Business Records – The Whys and Hows
Accountants in Birmingham – Small Business Accounting Tips
The importance of keeping proper business records cannot be overstated. Businesses amass a great deal of records, from incoming supplies to outgoing sales, from employee records to business contracts, from repair and expense receipts to revenues from business operations, there are records for everything. Keeping track of records and knowing what to save and for how long can be a daunting prospect. Saving documents can be both a time and storage space consuming issue for businesses. In general, records pertaining to financial transactions and employee records should be kept for a minimum of six years.
Governmental reporting for taxes and regulations regarding employees are generally the first instances illustrated when discussing the importance of keeping proper business records. These are very valid reasons for keeping records. Income (revenues) and expenses must be recorded for tax purposes and those records may be required several years after the year in which they occur and taxes were paid. Governmental regulators and agencies meant to serve employees can request documentation on a specific employee years after the period the record covers. As such, accurate documentation on pay and pertinent hiring information should be tracked and recorded.
Another reason illustrating the importance of keeping proper business records are the requirements of certain lenders and insurers. At some point, nearly every business will need to borrow money or obtain credit. Whether borrowing money to expand or using credit to procure supplies and raw materials, business credit is an important financial asset. As such, lenders will require documentation of past profits. They will use these records to compute future profit and loss projections. Similarly, whether insuring against losses from physical damages, covering liability, or protecting employee heath, insurance companies will often require both financial and/or employee statistics records.
The sale of a business also requires extensive documentation. It is quite possibly the most common illustration of the importance of keeping proper business records. Historical data on company finances plays a large role in determining the sale price of a business. Likewise, supplier and customer records, as well as the results of past marketing activities and expenses are invaluable to a new owner. This helps them prevent previous mistakes and continue achieving successful operations after the sale. For selling owners, financial records ensure an accurate sale price so they get what their business is worth when sold.
Small Business Cash Flow Top Tips
Cash flow is king in the world of the small business and unless you are particularly keen on using expensive forms of credit it is probably a good idea to adopt good working practices right from the start to keep cash flowing.
- Be aware and forewarned. Only by keeping completely on top of your cash flow situation will you be able to deal with any potential problems before they get out of hand. You will probably have included a cash flow forecast in your original business plan, don’t waste this, update it weekly and don’t ignore systems that can make this process easier; look at accounting software that incorporates a reporting tool as this will allow you to access the relevant figures at the touch of a button. It is however pointless having instant access to great information if you fail to respond to what it tells you. Look for looming cash flow issues and address them early.
- Market Effectively. One potential reason for poor cash flow could be stagnating sales. Go back to your original marketing plan and revise your strategy. If you don’t reach your customers, existing and new, things are likely to grind to a halt.
- Easy Payment. Once you have reached the customers and convinced them to order, make it as easy as possible for them to part with their cash. User-friendly systems like telephone and internet ordering are a must and if there is a way to pay accept it; card payments, direct debit, standing order. Make things as easy as possible for people to give your business what it is owed.
- Credit Control. When customers don’t pay you will need an efficient strategy in place to recover debts as quickly as possible if you don’t want to end-up in a cash flow crisis, but one of the best ways to avoid the situation of bad debtors is to run credit checks before extending credit to anyone.
- Supplier Management. Use suppliers with whom you’ve negotiated advantageous payment terms where possible and ensure prompt delivery, if every link in the cash flow chain is not working smoothly problems can and will arise.
- Production Efficiency. Even if your customers all pay on time and your supplier is happy to wait for payment for months, cash flow issues will surface if you don’t get paid at all because you haven’t delivered. Assess the quality of your product regularly and maintain stock quantities sufficiently.
So, king or not, cash flow is something that can easily be managed and certainly doesn’t have to be a worry. If you take care to put the right measures in place early there is no reason at all that your small business can’t have great cash flow. Ask Accountants in Birmingham for financial business advice.