Many entrepreneurs fail to recognize the importance of keeping a good set of books and records.
An orderly set of books and records is normally associated with preparing the company’s Year End tax returns, sales tax returns, and numerous other forms a company must complete to be in compliance with the growing set of government regulations.
While the above statement is true a good set of books is invaluable in running a business. An accurate accounts receivable report, accounts payable report and inventory report coupled with an income statement will allow the business owner to have the correct tools to make an accurate diagnosis about the health of the business.
An increase or decrease in sales is not the only indicator that your business is doing well or poorly.
Are you spending too much money on advertising, payroll, rent, etc? Questions such as these can be answered by looking at the income statement.
The often overlooked balance sheet is the best tool to keep an eye on your cash flow. The major warning sign that you may be in trouble is to add your cash and accounts receivable balance together and if the total is less than the total of your accounts payable you may be heading into choppy waters. Then look at any loans you may have with the bank and you will start to get a good idea if you will be starting to have difficulty paying your bills.
This procedure should be done at a minimum once a week If you believe you are having problems, take a detailed look at your income statement. It may be hard to change fixed costs like your rent, but take a look at other line items you might be able to change such as payroll, advertising, etc. Of course constantly review both how you are pricing your goods and services and what you are paying for them.
Fortunately, even if you are a very small business a quality accounting system is affordable. For instance, Quick Books online will cost between twenty to forty dollars per month, is relatively easy to use, and provides some pretty sophisticated tools considering the price point. Quick Books can also be integrated with many major banks on-line systems and save hours of data entry.
Having a good set of records will provide you with data points to indicate if you heading into trouble and if you are fortunate you will be able to make the adjustments to keep your business profitable with minimal debt.
In the event you find yourself in a situation where you are having difficulty paying your bills it is best to seek out a professional who is experienced in helping companies having cash flow problems
It is difficult to focus on running your business when the bulk of your day is spent picking up the telephone and having creditor after creditor ask when will they be paid.
Business Advisory Center has been helping small business owners resolve cash flow problems and reduce their debt since 1997. We will help you prioritize which creditor is paid first and handle all incoming and outgoing correspondence. We will develop a comprehensive written proposal outlining your financial condition and the problems the company encountered which created this debt crisis. Our company will then ask for a reduction in the amount owed and ask for several months to pay off the balance. Most companies would prefer to take a reduction as opposed to potentially receiving nothing and incurring legal fees in the process. Business Advisory Center’s fee is performance based. Average savings are between 30% and 50% with payment terms ranging from three to nine months.
If you find your company in a situation where you are unable to pay your bills, you are being hounded by collection agencies and the process server is at your door, please contact one of our principals for a complimentary consultation