Regularly review the Accounts Receivable Aging report that shows the amount each customer owes you over 30 day, 60 day and 90 day periods and use this information to aid in your debt collection efforts. You should aim to have no debts outstanding over 30 days. Check out our article on minimising non-payers here:
2. Cash Flow
Cash flow problems are commonly the cause of small business failure. Create a budget so you can keep track of cash coming in, such as collections of debt and additional funding, and cash going out such as payment of bills, Payroll, tax liabilities and drawings. It is important to budget and anticipate cash flows to avoid negative cash flow and being unable to repay your debts.
3. Reconcile Your Bank Accounts
Bank reconciliations allow you to check your own bookkeeping records against those of an external party, such as a bank. It allows any errors to be identified and corrected quickly and it is best for this to occur as soon as possible. Bank reconciliations should be performed on all bank accounts, loans, credit cards and clearing accounts on a regular basis such as monthly or even weekly.
4. Be Aware of Your Tax Liability
Regular bookkeeping along with accounting software allows you to monitor the GST you will be required to pay to the ATO. It is important to be aware of what this amount is expected to be to ensure the business does not spend money that really belongs to the ATO and is left short at BAS time.
5. Control Your Drawings
To continue operating, businesses need working capital. The amount available for business operations is often significantly depleted by owners’ constant withdrawals from the business. Set up a strict amount to be transferred from the business account weekly, monthly, or less frequently if possible to minimise the transactions required to be coded by your bookkeeper and ensure your business has enough capital to continue running.
6. Check Actual Figures Against Your Budget
When receiving invoices for expenses be sure to check them against previous months’ and years’ records as well as your budget to ensure you are being as cost-effective as possible. If there are significant differences, look into what has caused them and identify ways to minimise the cost in the future.
7. Be Aware of Your Payroll Obligations
As employers, there are various obligations that must be met such as withholding tax, leave entitlements, allowances, superannuation and Workcover. Ensure you are meeting your obligations to avoid non-compliance and hefty fines.
8. Inventory Management
It is important to keep an eye on your levels of inventory and the amount and time required for them to be converted into sales revenue. Taking the time to monitor your inventory levels can allow you to make more cost-effective and profit-increasing decisions when purchasing inventory.
9. Technology is Your Friend
There are various Accounting software packages available to suit your business and to minimise the time spent performing the menial administrative tasks involved with running your business. Along with the use of email and internet to connect with current and potential clients, technology can be used to your advantage to make your small business thrive.
10. Contact Us!
If you need assistance in implementing the above steps or support in continuing with them, contact Accountant Ready Services to relieve the pressure. We’ll do the work, while you focus on making money.