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For an entrepreneur with a small business, cash flow management is the most crucial part of small business accounting. As the saying goes, "cash is king," and good cash flow and cash flow management can make or break the business. By better understanding your revenue resources, different types of expenditure, and what remains as the profit, you will find it easier to manage the cash flow accounting.
Tips to Manage Small Business Accounting Cash Flow
Following are some of the tips to help manage small business cash flow accounting well.
1. Maintain Regular Finance Records. There are three measures that generally help judge how well run your finances are. What your business is worth is reflected on the balance sheet. The profit and loss statement tells you whether you are in the red or running a profitable business. From the cash flow statement, your future cash balances can be predicted. Maintaining the accounts regularly and keeping all the above up to date will go a long way in taking care of the cash flow.
2. Employ a Bookkeeper or Accountant. The importance of getting a good bookkeeper who is knowledgeable about your type of business–whether it is product-based or service-based–cannot be overemphasized.
He or she will help out in:
a. Payment of bills, checking receipt of services, products, etc.
b. Chasing debts and dealing with slow or non-paying customers.
c. Day-to-day cash management.
d. Issuing invoices.
e. Keeping regular records for tax purposes.
3. Use a Good Accounting Software Program. Do a market survey to know what sort of software will help you keep track of the ins and outs of the cash and all the other nitty-gritty details. A bookkeeper or accountant can help in identifying which of the many different software programs will suit your business. Once customized, it will take a load off you by attending to all programmed aspects.
4. Plan a Budget. This will convert your business plan in to actual numbers. Tracking expenses and income on a weekly or monthly and yearly basis and comparing with the previous month’s and year’s statements will help you tighten the expense and explore areas to increase revenues.
5. Maintain a Contingency Fund. This is a wise precaution in case of emergency situations like the sudden breakdown of machinery or other untoward circumstances. This can help when sales drop unexpectedly.
6. Prepare for Tax Obligations. There are so many complicated processes that need attention like deductions and depreciations. An accountant will be knowledgeable about these and can deal better with these issues.
7. Separate Personal Records from Business Records. This is best even if you do not have any partners. The accountant can deal with the business records and maintain the company’s bank accounts. Keep the business account records simple for easy follow-up.
8. Keep an Eye on Every Financial Transaction. It is best not to delegate authority totally or blindly. Learn to locate fraud, waste and unnecessary expenditure. Keep an inventory of all the deals, payments, etc.
These are a few of the tips to let you manage small business cash flow accounting effectively. Take a personal interest in all matters. An alert entrepreneur is a successful businessperson.
