If you happen to be involved in the business of kittens or coffee cups (aka, pet care product distributor or café operator), accounting often fades into the back of your mind. Nonetheless, your accounting validates your business achievements. So resolve to follow the money this year.
We know… resolutions are hard to keep. As the year moves on, you get distracted and lose the drive to count numbers, but that very ‘number counting’ might determine if you use debt or cash to cover operating expenses in the slow months. If you’re looking forward to the anxiety and loss of control over your small business, then read no further. Should you choose to have eyes wide open on a productive year, we’re happy you decided to read below. Follow these 10 important can-do and must-do activities for better accounting management in 2015.
1. Get closer to your accountant
Build a serious relationship with the person in charge of your accounting. His ‘once a year’ visit to prepare for filing will not be enough. This adviser knows where to find the money, hidden in tax credits and corporate regulations. He can also help you get through the other resolutions that you need to make for your finances this year.
If you don’t already have an accountant, get one. It makes sense to outsource the work that doesn’t directly add to your bottom line. So if accounting isn’t your thing then don’t spend 3 hours a day doing work that someone else is better suited to.
“Only accountants can save the world – through peace, goodwill and reconciliations.” – the Alternative Accountant
2. Reevaluate last year’s plan
Resolve to be honest and realistic about the financial targets you may have missed. Did you set your sights too high for your type of business? Did you anticipate close to accurate levels of expenditure, cash flow and profit? Have you also learnt how to properly price your goods or services? Don’t undercharge in your bid to win new customers.
As a follow up, set aside a time for periodic reviews, whether monthly or quarterly. Check if you are on track with your margins, receivables, payables, cash flow and forecasts.
3. Understand what you are seeing
Get a clear understanding of your finances. Learn what the numbers mean. When your accountant translates them into ratios and margins, understand what it means for your small business. Investopedia has a dictionary of accounting and investing terms, so school yourself on unfamiliar concepts.
As you understand more, you will learn to manage your cash flow well. Customers pay in 60days but staff has to get paid in thirty. Know how much money you will have to work with in each season. As a new business, look for trends or predictable outcomes in your analysis?
4. Automate your accounting
Do everything that you can to create efficiencies. Set up new payment systems for customers and accounting software for regular reporting. It’s time to move away from Excel or other desktop software. Choose the best cloud accounting software for your personality and business type. In selecting the right program, think about the nature of your business, your information requirements and the time you have to process it. HeadOffice is secure, tailored for the international accounting environment and made specifically for small businesses.
5. Keep a close eye on Receivables
Did you collect on all unpaid bills before the end of the year? If not, improve your receivables process for better cash flow. Devote time to ensuring you get paid faster. It’s important to your company’s financial health. This may mean making payments as easy as possible via online channels or mobile platforms. Check out our previous article for ideas on how to manage your receivables.
6. Get Compliant
Is your accounting process compliant with global and local accounting standards? Since 2002, the Institue of Chartered Accountants of Jamaica adopted International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as Jamaica’s national accounting and auditing standards. If you do the bookkeeping on your own, ensure that the type of accounting that you do aligns with these standards.
You must also maintain proper records. There will come a time when you must hire an accountant. Make it easy on yourself and on her to put everything together as regulations require.
7. Schedule early filing
Filing your annual returns does not have to set off a panic button. Commit to start early and do the little things necessary this year. As you regularly review your accounts, you’ll be able to pick up errors and correct them before you the memory of their cause leave your brain forever.
Add filing dates to your calendar so that you prepare them on time. Don’t wait until lines are longer, penalties and interest are added or the government actually writes you before you make payments. Also ensure that you cover ALL tax types including payroll, corporate and investments.
8. Look for Tax Savings
This is where your accountant comes in especially handy. There are changes to the tax laws almost every year. The government taketh away, but they sometimes giveth. Find out if there are any industry concessions or credits that you are eligible for this year.
9. Find out your company value
What’s the value of your company? You should get a valuation done annually. This could be the year that you can decide to go public. It’s also good to know if you decide to take on a partner or other shareholders so that you can change your focus.
10. Tighten Fraud controls
Is it easy for your employees or customers to pinch a penny here and there? Review your internal accounting controls, so that you are not easily robbed. Do you still maintain a good relationship with those who co-sign your cheques? There’s no need to get paranoid, but put systems in place to protect your company.
If you’ve made it this far, then congratulations! Your finances are already looking healthier for the resolutions that you’ve gotten. If you’re already using HeadOffice, let us know how it’s working out for your business in the comments below.