Accounting is one of the main tasks for small and medium-sized enterprises. With no one to oversee their finances, it’s up to you to be diligent about your accounting practices. If you want to grow your business, you must understand how to count pennies. Here are five tips for accounting for SMEs.
Audit your records
One of the best ways to keep track of your spending habits and make sure you’re on top of your accounting practices is through an audit. Doing an audit will provide you with a detailed understanding of how you spend money, which will help you understand where your money goes and what opportunities there are for saving.
When you get paid, the first thing you should do is save your receipts. This can be difficult if you’re working on the go, so try and keep a small envelope in your bag to store them in. You can then use these receipts to record what you’ve spent money on, and deduct it from your income.
Track your income and expenses
Accounting is all about the numbers. You’re going to need to track your income and expenses to know what you’re bringing in and what you’re spending.
To tally your income, think of all the different sources that bring you money–such as product sales, fees for services, and interest on loans. When you have a physical record of your income (such as cash or a check), it’s easy to add it up. However, if you don’t have a receipt for an expense (like paying for utilities or food), then make a note of it in your ledger with an estimated amount of money.
Monitor your accounts receivable
Monitoring your accounts receivable is one of the most important responsibilities for small and medium sized enterprises. Accounts receivable is a critical aspect because it informs how much cash you have at any given time. In order to stay on top of cash flow, you need to know when you’re owed money. For example, if you send an invoice and the customer doesn’t pay it in a timely manner, then you should take those funds out of your accounts receivable.
Keep your cash flow in check
Accounting for small and medium sized enterprises starts with the financial side of your business. The first thing you need to create is a budget and a cash flow forecast. This will help you keep your cash flow in check, avoid overspending, and make sure you have enough money in the bank. You should also take steps to ensure that all of your accounts are reconciled monthly or as often as is required by your industry/regulatory body.
As a business owner, you have a responsibility to your business to ensure that it is operating as efficiently and profitably as possible. Your records and your finances are the best way to keep tabs on your business’s performance. Being aware of your company’s financial standing and keeping a watchful eye on what’s happening in your company will help inform your most important decisions in the future.