Chris Ridd, managing director at Xero Australia
1. Keep your accounting system completely up-to-date
One of the best tips I can give to small businesses that want to better manage their finances is to look at their accounting system every day. It doesn’t need to be a lot of time – just five minutes is usually enough. Checking on finances daily, rather than once a week or once a month, ensures you don’t have any fires to fight.
A daily check-in helps you to keep on top of bills, expenses, receipts and tax payments. Inputting receipts, automating regular business payments and approving invoices and expenses as you go helps avoid a mountain of finance paperwork at the end of the month or financial period.
Part of this daily process is looking at your company’s bank feeds.
This gives you a clear picture of real-time cash flow and can highlight any overdue creditors or debtors and ensures you can chase invoices and avoid overdue penalties in a timely manner. Looking at your accounting system and bank feeds every day will help give a better idea of where your business stands and how you can best influence its financial position.
2. Invest time in understanding your system
Another important tip is to invest some time in understanding your accounting system. Every business owner should ask their accountant to explain what the various numbers and figures in each report mean, particularly trend reports. Basic, static reports are fine but understanding historical trends helps you forecast cash flow. Once you have a forecast you can plan for what the future brings. Not only that, the business decisions you make will be better.
Understanding the financial key performance indicators in your business will allow you to look at your finances daily and keep your small business on track.
3. Sharing access helps share the load
The final tip for small businesses is to share access to your accounting system with more people in the company. The more people who can access and use the system, the more there are to help share the accounting responsibilities. Accounting systems should allow you to give users different levels of access without giving away transactional access. This helps your staff to better understand how finance affects the business without you worrying about inappropriate usage. One of the most important things to do is invite your accountant into your accounting system. Many small business owners these days are treating their accountant as their CFO to make the most of the business relationship. For instance, your accountant can spot any potential problems early on.
With greater visibility of your accounts and daily cash flow position, accountants can help manage the business more effectively so your company has a much better chance of prospering. There’ll be much less stress for you, too.
