Most people start their own businesses because they are excited about creating something new, providing an innovative product or service, or just for the chance to be their own boss. Somehow, in the middle of all these aspirations, we never picture ourselves staying up late at night and wading through seemingly endless bookkeeping and accounting tasks.
Unfortunately, no matter how great your idea might be, it can still fail if you’re not keeping up with the finances. A lot of entrepreneurs don’t expect this to be much more than adding up the revenue, subtracting the known expenses, and establishing the profits, but it is actually so much more than that. You don’t need to get bogged down in great, sweeping financial theories and plans, but you should do everything you can to take care of your finances to keep your business on track.
Find an Accounting Program that Works for You
A spreadsheet does not count as an accounting program. That’s the modern day equivalent of keeping all your receipts in a shoebox until tax time. There are many accounting programs available for the average entrepreneur entrepreneur.com, and you should always take the time to research its features and make sure it can be customized to fit your individual needs.
Record keeping is one of the most important steps in the accounting process, and the right program will help you keep all the incoming and outgoing cash properly organized. Spreadsheets are for companies that don’t expect to grow a lot. A professional program is for entrepreneurs that have real goals.
Plan Your Budget
Cash flow management is a bit more complicated than many entrepreneurs realize, but it is important to plan for future expenses and carefully balance income and expenditures. If you use the financial information collected from the detailed record keeping process, though, you will be able to review your performance and strategically plan for the upcoming year.
Billing and Collections
Don’t be fooled by a large Accounts Receivable section of your finances and do not count this as income – not until you actually receive the cash. Establish your invoicing practices early and make sure it is tied to your other accounting procedures. This way you will know what is due, and what might require some extra work to collect on those accounts.
Nothing will confuse an entrepreneur’s accounts more than combining business and personal finances. Keep a separate bank account and get a dedicated credit card for your business. If you get in the habit of mixing your assets with those of the business, you can quickly get in over your head.
Consider Outsourcing Some Tasks
When your company starts to grow, even the best software may not be enough to stay on top of the finances. As more tax laws start to apply and employees still seem determined to get paid, you may end up spending more time on accounting tasks than actually running the business. This is the point where you may consider outsourcing things like payroll or tax services to a financial management company to make sure you are compliant with the laws and still making a profit.
The Big Picture
There is a lot more to business than gross sales, but unfortunately too many new entrepreneurs tend to focus exclusively on those numbers. The revenue sources, accounts receivable, capital expenses, taxes and many more items have to figure into your strategic plans, and that means you need to be prepared to spend the necessary time and effort to do the accounts right. Move past the old spreadsheets and piles of receipts and make sure that you are accounting for all your time and transactions.