Running a small business efficiently is crucial for success. Every decision has a huge impact on its future. That’s why small business owners must recognize the insights and advice they can get from their accounting.
Steve Loates, a small business owner of 25 years, shared some fantastic personal insight on a blog post of ours. “When they first open their business many owners are not qualified to run a company. I know I certainly wasn't. I have made just about every mistake you can make, and have managed to stay in business. But it wasn't until I met an accountant that took the time to explain my P&L and Balance Sheet to me that things changed and my business began to thrive.”
Accounting is the core of every business and is key to its success. In this article, we'll drive that point home. We’ve compiled tips on how to supercharge small businesses with accounting processes done right. So without further ado:
1) Plan and consult with professionals early on
Passion is crucial, but a solid business plan is what keeps owners on track and mitigates errors. It has a multitude of benefits from appealing to investors to helping a business grow.
This is a point that's emphasized by Rustin Smith and Azucena Saucedo of the firm Scalability. "As soon as you decide to launch your business, you should already have a bookkeeper and tax accountant who has a plan of action for you from day one." A business owner needs a roadmap. You also need advisors to help you understand accounting. As Connie Vanderzanden shared from her own experience as a business owner, “Build a team of experts to make sure your business is starting out on a firm footing, and then step off the cliff into business ownership.”
Having this consultation as early as possible is critical. This gives you, as a small business owner, the solid foundation you need to build your business into something great.
2) Outsource what can be outsourced
A common complaint from CEOs is that they don’t have time to manage their financials. Hiring or outsourcing to a professional ensures that someone is properly tending to the task. After all, a business owner doesn’t need to be hands-on with the drudgery of data entry. In the words of Holly DeVito, “Where could you better be spending those hours?”
With work delegated, the owner can focus on growing the business. Bringing in a professional means working with someone who has insight into effectively managing finances. Crucial reports can be prepared for the business owner so that informed decisions can be made.
Of course, an owner should still know what’s going on with their finances even if the work is outsourced. This is why proper communication and reports are essential. When handled correctly, hiring or outsourcing will be an incredible help for a small business.
3) Use the right software
Now, business and bookkeeping tasks can be accomplished through a few taps on a smartphone or with automatic fetching. Consequently, software has become an integral part of the small business owner’s toolbox. But as Rustin and Azucena say, "Each business is unique, and the most amazing app out there may not be the right one for you." Software isn’t one size fits all.
Advisors must consult with their clients, understand their needs and solve with the right software solution. For both the advisor and small business owner, the best approach is to work backwards, starting with what you want the software to deliver. This makes it far easier to determine which features you need.
Bookkeeping software will save your business time, effort, and many headaches in the future. Because of that, it's critical to take time to choose the right one that will integrate with existing processes and scale with your business.
4) Turn organization into part of your daily routine
Keeping organized is easier than ever thanks to modern software. Getting organized once meant hours upon hours of sorting through cabinets and boxes of receipts. Now, business owners can take photos of receipts as they get them. The image will be sent off to their bookkeeping software of choice and converted into data. Tedious and non-value-add tasks which once took hours or days can now be taken care of in a matter of seconds.
Since staying organized is no longer a burden, it can become a habit which maximizes efficiency and ensures up-to-date financials and an audit-proof business. This saves time and effort in the long term and can keep you invaluably informed on your profits and expenses in the short term.
5) Check business health regularly for crucial insights
Cash flow is king and keeping an eye on financials consistently will help you steer the ship more effectively. It will help prevent end-of-the-month surprises and provide transparency into expenses.
This was what Vanessa Kruze said was the number one mistake made by small businesses. She gave an example of a CEO whose meal and entertainment costs had risen from $1,000 per month to $11,500 in nine months. It goes to show that even the smallest transactions can add up to something huge if they are not regularly tracked.
Advisors must help their clients understand the importance of not only keeping an eye on accounts, but also of regular bookkeeping. This means getting all necessary documents together and getting timely financial reports. These provide invaluable insights and are crucial for monitoring and growing a business efficiently. Having this visibility on a regular basis means that a small business owner will have the crucial information needed to make smart decisions.
Small business owners can make their accounting efficient and valuable while reducing administrative overhead. What tips do you think are crucial to streamline small business accounting? Leave a comment on this post or tweet at us @Hubdoc!