It’s the time of the year when everyone is sending out tips to help you set and achieve your goals in the new year. Well, we’re no different. We know that many small business owners are realizing that they have opportunities to improve how their business is performing if their accounting could help them make decisions. The following 5 ways are guaranteed to help you get actionable information and increase profits.
First let go of old ways, if you can’t do this you won’t be able to improve
Change and improve small business accounting It’s obvious that you can’t improve without change but so many of us want improvement without us changing our ways. Like losing weight, if you don’t change your habits, nothing is going to happen. Many small businesses are either following antiquated processes that would no longer be needed if the new technology was implemented, or they are following processes that simply evolved over time with the business and may not be efficient. It’s worth stepping back and evaluating how you do things. An unbiased third party is often a great resource to help evaluate your processes and systems.
Marry accounting to finance and link past performance to future expectations
Accounting or bookkeeping on their own is scorekeeping. If your business was baseball, they could tell you what base you’re on, but they couldn’t tell you how to reach home. In an earlier article, I spoke about the Hierarchy of Financial Management Needs which discusses how businesses can advance quicker by integrating both historical accounting activity with forward-looking forecasting and planning.
Keep up to date – old news is no news
Many small businesses that I have talked to are, on average 4 months behind with their accounts. This means the most they will know about their business is news from months ago. Unfortunately, this indicates that tax compliance is a primary motivator for keeping their books and nothing more. If the accounting was kept current, it would then be possible to see how you’re doing before it’s too late. Either way the books will need to be completed every year, so there is no benefit of not having them be timely.
Look for systems that will do more and pay for themselves
I recently implemented an Accounts Payable system setup with a new client. We expect it to provide tremendous resource savings, both time and money. Savings include not only on check stock but also late payment fees, postage, and the labor to process each payment. Additionally, the Bill.com workflow nearly eliminates the likelihood of bookkeeper fraud in the accounts payable function. It is easy to recognize the many savings of a proper system implementation or upgrade.
Determine if you’re an impediment take yourself out of the middle
One of the most common problems that small businesses have with their accounting function is that the owner refuses to remove themselves from the process. This is true even though they usually have neither the time nor appropriate skill level required to perform the activities. Even if neither reasons are true the opportunity cost of as they say “working in the business and not on it” is very high for a small business.