Did you take a financial literacy or accounting course in school? Many have not taken even one, so it’s understandable why business owners sometimes make poor choices regarding the maintenance of their financial records. As the saying goes, when we do better when we know better.
Below are 3 common mistakes made by businesses and some ways to get back on the right track:
#1: Incomplete financial records from the previous year
Financial records should be updated for tax purposes. If your bank and credit card transactions have not been reconciled the financial statements produced are not accurate. Ensure all transactions whether that’s cash, debit or credit card transactions are in your accounting software or spreadsheet. Completing the process of closing your books is in your best interest. Many business owners miss out on tax credits and deductions because of incomplete financial records.
#2: Not creating your playbook
Your budget is your playbook. Your favorite sport team has a playbook that allows them to execute. The budget does the same action and allows you to focus on how to operate within the year. It’s the roadmap that details the expected revenue and incurred expenditures. Take time to create a budget that comprises sales, payroll, capital purchases, and expenses. Account for external opportunities and threats such as a new law passing that could provide a new client base or vendor closing shop. Don’t go into a new year without a plan.
#3: Spending time on penny tasks
Your time should be spent developing the business, meeting clients, and closing deals. There are certain accounting tasks that can be automatized. Instead of manually entering transactions into your accounting software, link your bank account to the software. If you bill the same client and amount each month set up recurring invoices to send automatically by email. Secondly create templates for invoices, contracts, or purchase orders so you are not recreating the wheel.
Implementing sound business practices are key to organizations who want to become top performers. These practices are chores that allow you to maintain quality service to your client. In which will create profits for your organization. If you skip on your chores don’t expect growth in your business. Don’t allow your business to manage you but you manage the business.