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In business, accounting is an essential component that should never be overlooked. Yet, many business owners and freelancers make the mistake of neglecting their accounts, and unfortunately, they often pay the price. While some may only face minor fines or the hassle of redoing everything, others could find themselves under investigation, potentially facing criminal charges for fraud.
So, it’s clear: getting your accounts in order is crucial. It might seem daunting, but with the right tools, systems, and assistance, keeping tabs on your business finances is actually quite manageable. Here are five key things you need to know about business accounting.
Keep and file receipts properly
No matter how small your business might be, you’re still running a business and must adhere to the same rules and laws as everyone else. Keeping receipts may seem tedious, but it’s necessary and will save you headaches in the future.
For example, if you buy a notepad for a few bucks, don’t toss the receipt. Keep it and file it correctly. Having an efficient filing system in place is crucial. Many business owners hold onto receipts but fail to organize them properly, cramming them into a drawer or envelope. This might work in the short term, but if you’re audited and need to find a specific receipt, sorting through piles can take ages.
Accounting software is no longer a luxury—it’s essential. As a small business owner or freelancer, you can greatly benefit from the automation that accounting software offers. With accounting software, you get all the benefits of having your own accountant, without the risk of human error. It saves you time by organizing your finances, performing calculations, managing receipts and invoices, and more.
Maintain accurate and reliable records
Accurate and reliable record-keeping is vital for managing your business finances. This doesn’t just mean keeping bank statements—it means keeping track of where every dollar is coming from and going to. This includes direct debits, standing orders, income sources, expenses, and more.
You need to know where your money is being spent, where your income is coming from, and how it’s being used to grow your business. While you could try to do this on paper, using digital tools like accounting software will save you time and ensure accuracy.
Manage cash flow effectively
Maintaining a positive cash flow is crucial for the success of any business. You need to organize and track where and when cash flows in and out of your company. Too much debt or overdue accounts receivable can put your business in a negative cash flow situation, which can be disastrous.
To avoid cash flow problems, have a strategic plan for paying all bills. Stagger bill payments and develop a system for when and how you pay them. Consider using instant payments, which are more convenient and faster, to stay on top of your financial obligations. Also, structure payroll and billing cycles to align with your company’s income stream, ensuring that payouts are well-timed with other business expenses.
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Ensure accurate invoicing
Invoicing plays a key role in every business transaction. It’s not just a nudge to remind clients to pay—it’s a vital record that outlines the specific details of each deal.
Your invoices should clearly list the services provided, the agreed-upon amount, the payment due date, and invoice payment terms and conditions. Accurate invoicing helps prevent payment disputes and keeps you in good standing with tax authorities. With Forwardly’s invoice creation tools, you can easily generate precise, professional invoices that streamline the payment process and ensure everything is in order.
Schedule profit and loss statements
To get a clear picture of your business’s financial health, regularly scheduling profit and loss statements is essential. These statements show which areas of your business are profitable and where you might be incurring losses.
Whether you choose to generate these statements monthly, quarterly, or annually, keeping them up to date will help you identify areas of strength and areas that need improvement.
We can help
Need help with cash flow management? Forwardly can simplify the process by making invoicing and billing easier. With faster payment options like instant payments and same-day ACH transfers, you can get paid sooner and pay your bills right on time, helping you hold onto your cash longer. Forwardly integrates seamlessly with your accounting software, including QuickBooks Online, Xero, Zoho Books, and FreshBooks, offering 4-way sync capability for a smooth experience.
Ready to streamline your cash flow? Sign up with Forwardly today—no monthly subscription fees, just better business management.
