If you’re setting up or presently running a small business, one of the most important tasks you have is keeping track of your in-house accounting and invoicing system. As a tip, it’s advisable to use accounting software, like Wave, so the app will do much of the hard work for you, freeing you time that could be used in other important business matters.
It would also be constructive to follow these accounting and invoicing tips so that your small business will flourish.
1. Be Clear About Your Terms
When you’re hired by a client, it’s usually a given that you and your client will set out the terms of the relationship at the very start. Not only is this less confusing, but that’s also the professional way to go about it. Part of the terms of your business relationship is knowing when that client will pay you. This will give you peace of mind since the client’s payment will support your small business.
Be cautious if the client seems to be uncertain about when they’ll pay you. If the project is supposed to yield a rather large payment to you, you can ask for a deposit or at least get paid in installments. That way, even if the client doesn’t honor their obligations to your small business, you already have a certain amount claimed by a certain due date.
2. Separate Your Personal Funds from Your Business Funds
It’s ideal to keep your personal funds separate from your business funds. This helps add clarity to your records so that you know how your business is progressing. It also gives you an idea of how much your personal expenses are. Also, it’s a good practice to set aside a certain monthly amount from your income just for your personal spending. That way, you won’t get tempted to use your business funds.
3. Make a Checklist and Budget for Business Expenses
All businesses have expenses, but not every business is financially stable. One reason this happens is that you may be spending beyond your means. So, if, for example, you’re buying office supplies, you should keep track of this basic expense by only buying what you know that you’ll regularly need. Resist the urge to buy beyond what your budget can support.
4. Close The Books Monthly
The reason this has to be done monthly is it gives you a clear idea of what’s happening to your business’ financial progress. This allows you to regularly see the state of your expenses and profits. You’ll then be able to make sound business decisions to propel your business forward.
5. Reconcile Your Books With Your Business Bank Account
As you check your books monthly, don’t forget to reconcile these with your business bank account records, too–there shouldn’t be a discrepancy. If there’s an inaccuracy, it’s best to find it right away so that your system will not flounder. Another reason you want your books to be reconciled with your business bank account is that your client may dispute the invoice you sent. If you have accurate records, you’ll be able to satisfy clients who want to double-check the amount they have to pay.
6. Establish an Easy Payment System for Your Clients
It’s a good idea to set up your payment system so that clients won’t complain that they’re having difficulty paying you. If it’s easy to pay you, your clients will probably be diligent about meeting their financial obligations. However, there’s a tendency that you get clients who need more than one reminder for their payments. This may mean that you have to hire a debt collector to follow them up, especially if the client keeps ignoring your invoices.
7. Pay Bills Before Their Due Dates
One reason you’ll need to check for due dates is the fact that you need to pay your bills promptly to avoid any penalty fees. Even if you can afford the penalty fees, it’s generally not a good idea to keep bills unpaid past their due dates. The last thing you want is to sacrifice your profits by paying those penalties.
8. Check Your Accounts Receivables
This is where you should keep a sharp eye out because you might have quite a lot of accounts receivables. Your business’ financial survival is dependent on these.
So, you’ll need to be pro-active about following up on your accounts receivables so that money keeps coming in. You can make this a regular task so that none get lost.
If you want your small business to survive, you’ll need to invest time, energy, and money into setting up your best practices for accounting and invoicing.
Once your system is up and running, you can easily merge these best practices into your business tasks. That way, in time, it’ll become second nature to you and you’ll feel comfortable even as you delve into it.