Learning how to manage your finances effectively is an important part of running a business.
Credit: Financial chart image via Shutterstock
Business finances may seem like a headache, especially during tax season. It's a lot of work to keep up with every receipt, invoice and payment throughout the year, but being organized and prepared with financial records is one of the most critical tasks a business owner has.
"There is nothing more terrifying, costly or risky than showing up at your accountant's office at the end of the year with a shoebox of receipts and nine of your last 12 bank statements," said Ryan Watson, co-founder of Upsourced Accounting and a partner of online accounting software company Xero. "It is impossible to overstate the importance and benefit of properly tracking your financial information throughout the year."
Xero recently hosted Xerocon, its first U.S. conference for accountants and financial professionals. Based on a survey of Xerocon attendees, the company offered these six tips to help small business owners better manage their finances. [10 Tax Solutions for Small Businesses]
1. Take advantage of the cloud. If you haven't yet made the switch from desktop software to cloud accounting solutions, now might be the time to do so. Real-time insights into your finances that can be accessed from anywhere at any time can provide a huge efficiency boost for small business owners.
"Cloud accounting gives small business owners the ability to dig into their finances whenever it's convenient, as well as have their accountant chime in from the comfort of their own home or office," said Jamie Sutherland, president of Xero.
2. Plan ahead. There will always be business issues that need to be addressed today, but when it comes to your finances, you need to plan for the future.
"If you're not looking five to 10 years ahead, you are behind the competition," said Tina Gosnold, founder of QuickBooks specialist firm Set Free Bookkeeping.
3. Spread out tax payments. If you have trouble saving for your quarterly estimated tax payments, make it a monthly payment instead, said Michele Etzel, founder of Bayside Accounting Services. That way, you can treat tax payments like any other monthly operating expense.
4. Ask for help. Many small business owners think they need to handle their finances by themselves and don't think they can afford to outsource. While you may think you're saving money by doing it yourself, it can really hinder your business if finances aren't your forte.
"The intricacies of small business accounting often fall outside the expertise of the common entrepreneur," Sutherland said. "There are lots of smart, capable people out there who can take this off your plate so you can focus on what you're passionate about. There is a good chance your business will thrive when you're able devote all your attention to what you're best at, while outsourcing the technical financial tasks."
5. Monitor and measure. Dave Casebere, founder and chief financial officer of D Casebere Consulting, recommended looking at your company's financial performance and using past financial statements to project future revenue, expenses and cash flow. Having this knowledge will help you make better decisions for your business.
6. Use the tools that work for your business. Watson believes there will be a mass adoption of software-as-a-service (SaaS) financial tools this year. Small business owners will have more options than ever to capture, track and analyze their financial data, but with that choice comes a greater need to understand those options and make informed choices about the proper platform for each business.
"Find a system that works for you; then stick with it," he told Business News Daily. "Talk with your accountant about the information you must keep and the things you need to know to be successful, and develop a realistic process for capturing only that amount of information."
Originally published on Business News Daily.