For a small business owner, success depends on many other factors than just the number of transactions. How you handle your money can completely change the way your business performs.
You can follow your dreams all you like and call all the shots, but you have to manage the money responsibly and have a tight grasp of your finances even at the end of the day.
Most small business owners are always strapped for cash, which can quickly turn sour if there is an emergency.
If COVID 19 has taught us anything, it is that business owners always need to have a steady and consistent cash flow and be ready to adapt. Here are the ABCs of money management.
P.S- we will also have a look at how expense management software can help you manage your finances better.
Monitor Spending
Most businesses have multiple accounts. Checking, savings, and credit card accounts are used for different purposes. This is why you must know how much you are withdrawing from each of your accounts and how much you are spending.
If you’re using any business cards to cover small expenses like staff lunch or new furniture for the office, you have to account for everything in the balance sheet. Small expenses can add up at the end of the month and be an essential factor when counting revenue.
If you write checks, you should also make sure that recipients cash them according to the times that are convenient for you.
If you do not monitor your checking account, an overdrawn account will generate a lot of overdraft and processing fees.
You can use the following software to record all the accounting transactions and log every small expense to stay on top of your spending.
- Fyle
Another great app that lets you stay on top of business expenses, billable time, and mileage. It will let you capture your transactions and sync with your credit card so it can automatically pull in all the expenses and track them in the app.
- BizXpenseTracker
The app has been created with small business owners in mind. You can create categories and subcategories of your spending and generate expense reports as necessary.
Monitor Your Accounts Receivables
In a small business, you will often lend money to your customer or schedule payment for a later date. You are well aware that you will not always receive money precisely on the day you delivered the work.
It can be easy to forget about these payments after a week or a month. However, if you are not tracking your accounts receivables diligently and following up on the payments, this is a recipe for disaster in a small business.
Your book should be dedicated to ensuring accounts receivables are tracked along with a receivable total, how many customers have passed the due dates of payment, and the total receivables.
This is the key to smart money management. You can follow up on due payments by sending invoices from apps that let you collect bills that are approaching or past the due date.
To further keep everything organized, we recommend integrating your accounting software with an expense management software. This will reduce the manual work and keep your expense data synced seamlessly.
- Quickbooks
Known as one of the easiest accounting solutions for small businesses, it has very intuitive functionalities. You can create recurring invoices, collect payments online from your clients via various payment methods. Integrate all these applications with your other business applications like stripe, Trello, or G Suite.
- Sage Intactt
This is another great accounting software with an intuitive dashboard that lets you keep an eye on overall expenses, payments, and invoices. You can create and capture invoices and accept payments. You can send invoices to your vendors and suppliers and sync all of your bank accounts so your employees and partners can have access to the same data that you do.
Separate Business And Personal Account
This seemingly small detail can entirely change how accurate your expense management is. You have to track your profitability, monitor spending, and reconcile all of your books and applications in one place.
By mixing your personal and business points, you are creating organized chaos that can lead to overspending or missed tax deductions.
More often than not, business owners end up mixing their personal expenses with business while making a purchase through their business credit card.
Combining different funds can make tracking various expenses very difficult, so you never know if you are dipping into the money from your business for personal expenses or the other way around.
This is when an expense management solution helps you out. The tool helps you mark an expense as personal, thus ensuring you save on tax deductibles and stay audit ready.
Embrace The Modern Technology
If you want to stay ahead of the competition and keep your accounts sorted without investing a lot of resources into it, it is high time you invest in a modern solution to save on manual work and errors.
As companies are adopting digital transformation whole-heartedly, take your best foot forward by embracing the change, and switching to automation.
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