If you are wondering whether or not you really need to prepare financial statements when you already know your business is profitable, the answer is definitely yes. You may be convinced that your business is doing fine, but you will need proof for investors, creditors, shareholders, government agencies, and essentially you will also need it for your own peace of mind. Feeling successful is great, but seeing the facts and figures in front of you that prove your success is empowering!
Better Decision Making
Financial statements are vital for making crucial business decisions. You should be reviewing more than just your bank statements whenever you are considering whether or not you can afford to invest money back into your business. Financial statements will give you a clear and accurate visual of how your business is currently performing, so you have a means of monitoring its progress and identifying opportunities for growth.
More On-time Payments
Financial reports like accounts receivables are essential for ensuring customers pay on time and account payable reports will make sure that your vendors are paid on time. It will also give you a reference point to predict your future cash flow.
Prepared for Tax Time
Regularly updated financial statements will keep your information neatly organized for tax time. You don’t want to realize that all you have is a shoebox full of receipts on April 14th. Regular financial reporting means your accounting software is also being updated regularly.
Provide Proof of Your Success
Financial statements will act as a historical record of the overall success of a business, if there is ever a decision to sell the business or obtain new investors. New clients and suppliers may also request financial statements while trying to determine if they should conduct business with your company.
Catch Costly Mistakes
A set schedule for reviewing your financial statements will help catch mistakes earlier. They can also help an owner detect theft, fraud, or illegal activities within their business. You can hire a professional accountant or a bookkeeper, or an entire finance department, but that doesn’t mean you still don’t need to be involved. As much as you want to trust the person who is handling your finances, you need to be watchful for any discrepancies.
Fortunately, if you use an online invoice software, you will be able to access instant and accurate financial statements from anywhere with internet access. It will make it easier to track clients, enter new invoices, manage expenses, and review reports while making crucial business decisions. Financial statements are so important to the success of your business, but they can be easy and accessible if you have the right software.
Managing any type of business in today’s competitive marketplace is challenging and small business owners have enough to worry about without stressing over their bookkeeping. Entering receipts and invoices always seems to be an afterthought or the lowest priority item on your to-do list, but you can’t ignore them forever. You don’t want to wait until tax time to figure out your finances.
That is why I recommend online bookkeeping software for all small business owners. It is the fastest and easiest way to stay on top of your small business’ finances. It will give you an organized system for managing all of your estimates, client information, payables, receivables, and financial reporting.
Accessible & Convenient
Managing your bookkeeping and invoicing online offers real convenience since it is accessible from anywhere. All of your information is kept online, so you can reference important financial reports, update receivables, enter invoices, and analyze your cash flow using any device with internet access. This will allow you to make sound financial decisions using accurate figures wherever and whenever an opportunity or challenge presents itself.
Online bookkeeping software allows you to quickly enter invoices into pre-set templates and then email them directly to your clients. This capability means that you can finish a project, enter the invoice, update your financial report with the new receivable amount, and place the invoice in the client’s hands all within a matter of minutes. Most online bookkeeping software programs will also request a read receipt for each invoice, so you can be sure the client has seen it.
Enter Expense Receipts
Online bookkeeping also means you can immediately enter your expense receipts as they occur instead of collecting a pile of different restaurant and gas receipts while you are travelling and then waiting until you get back to the office to enter them. You still need to keep a copy for tax purposes, but at least you won’t be scrambling at tax time to make sure that you have accounted for all of your expenses.
Saves Time & Money
Online bookkeeping software has auto-fill entry and calculation features that will save time and its ability to email invoices directly to your clients will reduce the amount of money you spend on paper, envelopes, and stamps. It is also so fast and easy-to-use that you won’t have the expense of hiring a bookkeeper or an accountant.
Small businesses should manage their bookkeeping online because it is easy, accessible, convenient, and it allows for instant invoicing and receipt entry. It truly is a great way to save time and money, while ensuring that all of your financial obligations are met.
Online billing is transforming the world of traditional invoicing into a convenient and efficient business machine. It takes all of the benefits of modern technology and applies them to the usually complicated process of record keeping and financial reporting. Besides being a fast and easy way to manage your bookkeeping, online billing software also has many additional features that you can use to your business’s advantage.
Simple ways to use online billing to your advantage:
Create Invoices in a Matter of Minutes
Once the online billing software has been updated with your businesses contact information and sales SKUs, it is simply a matter of selecting a client, selecting the items you are charging, and entering in the price. The software will do all the formatting and calculations on your behalf, which will save you precious time. You can use this to your advantage by spending that extra time on generating new business.
Email the Invoice directly to the Client
If you use online billing software, you can send the invoice to the client’s inbox, and even request a read receipt, so you know the client has seen it. These programs even come with the ability to send automatic reminder notices and thank you letters once the payment has been received. This can work to your business’s advantage by speeding up the usual payment process.
Easier to keep Reports Up-to-date
Every time a payable or receivable is entered into the software, all relevant reports are automatically updated. You can login and view (or print) your financial statement, cash flow statement, income statement, or account receivables/payables reports instantly. As long as you are entering each bill into the system as you receive it, the reports will be accurate and current.
Accessible from Anywhere
Since your bookkeeping is being managed online, it can quickly be accessed from any computer that has an internet connection, include smart phones. This can be incredibly advantageous, especially when you need to make quick business decisions outside of the office. As mentioned in the previous point, the reports you view will have the most reliable figures. This means you can make fast financial decisions that could benefit your business using the most current picture of your company’s financial status no matter where you are at that moment.
Reduces paper cost
By working online, the decision to print hardcopies becomes completely optional. If you are emailing invoices and reminder notices to the client, it will save your business on paper, envelopes, and stamps. This is not only an advantage to your business, but it is also beneficial to the environment.
Online billing creates invoices in minutes, emails them directly to the client, automatically updates financial reports that are then accessible from anywhere, all while reducing paper costs. These are just some of the many ways that online billing can be used to your advantage.
Unfortunately, most small businesses do not put enough emphasis on their accounting until something has gone terribly wrong. The realization that your bookkeeping has not been kept up-to-date usually happens a few days before taxes are due or even worse, when you notice charges on your bank account for a check bouncing. You can save yourself all of the stress and less minute updating by developing a successful accounting strategy upfront.
The first and most important part of your accounting strategy is to maintain accurate and detailed records at all times. Set yourself up for success by dedicating a specific time each week that you will devote strictly to updating your books. If you use online billing software for your accounting, it should only take 15 to 30 minutes per week to enter all of your transactions. These programs have easy entry blank cells on pre-designed templates, so there is no need for calculations or formatting.
If you need information mid-week, you can quickly enter the last few days’ worth of receipts and all of your reports will be accurate. The next strategy will involve a regular review of these reports, to make sure everything is on track. You should run your cash flow statement, your balance sheet, and your income statement quarterly (or more frequently) to ensure everything is on track. If you use an online billing software program, reports can be quickly run in a matter of minutes, so there is no reason you can’t review them regularly.
You will also be able to generate an account receivable report quickly, which is the next important aspect of your accounting strategy. There will be clients who take longer to pay then the agreed upon terms and it is crucial that you recognize the past due invoices as quickly as possible. Sometimes all it will take is a professional reminder notice to turn that receivable into working capital that you can use to pay your bills. A solid strategy for success involves reviewing your accounts receivable weekly and following up on anything that is past its due date.
The last crucial component to your strategy is planning for major expenses. If you are using all the income your company generates and you are not putting any aside for taxes or emergencies, you are setting yourself up to fail. Make sure you are keeping enough for your taxes in a separate account, as well as an extra 1% to 5% as a safety net. This way you will have the funds if something goes wrong or if there is an opportunity for growth.
Accounting for small businesses does not need to be complicated. If you take the right steps in the beginning, like maintaining your records, reviewing your financial reports, and putting a little extra aside, it will be much easier for you to stay on track.
Bookkeeping is probably not the most exciting part of your day, but it is crucial component of running your own business that cannot be ignored. Whether you hire someone else to do it for you or do it on your own, it needs to be regularly maintained and monitored. In order to make that process a little less daunting, we’ve compiled some quick and easy bookkeeping tips for your small business.
Seven Best Bookkeeping Tips for Small Businesses:
Organization is essential
If you start right from the beginning with an easy-to-follow and organized system, it will be easier for you to maintain and adjust it as your business grows. Research various bookkeeping methods on the internet and find one that makes sense for the size of your business and what you need it to accomplish.
Use an online bookkeeping system
One of the most organized bookkeeping systems you can choose is online billing software. It offers pre-designed templates, auto-fill-in forms, and helpful financial reporting that can make managing your business as simple as logging into a website.
Schedule a set time each week to enter all invoices
Make sure that there is a portion of your weekly agenda designated specifically on managing your finances and updating your records. Depending on the volume of invoices you receive, this should be easily accomplished in 30-90 minutes per week, especially if you are using an online bookkeeping system with quick entry fields and handy drop-down toolbars.
Reconcile bank statements monthly
Even if you regularly review your cash flow statement and your bank statement separately, they should still be double-checked and reconciled. This will help you quickly spot discrepancies if they happen to occur.
Create a separate account for taxes
Separating the taxes you will owe from each receivable as it is paid will put you in a better position when it is time to file your taxes. This way if you end up owing money, you will already have it saved up, hopefully with a surplus that can be invested back into the business.
Review your cash flow statement as often as possible
The cash flow for most small businesses is constantly fluctuating, which means it needs to be regularly monitored. If you are using an online bookkeeping software program, it will be easy to generate and review your cash flow statement from anywhere. This way you can avoid insufficient fund charges by researching financing options in advance and making sure all of your debts are covered.
Review your receivables and follow-up on past due invoices
It is safe to assume that the majority of your clients will pay on time, but you will always encounter a few stragglers who take longer than agreed on. Regularly running an account receivable report will help you catch it sooner, so you can follow-up with a professional reminder.
That is really all it takes to manage your finances! Following these seven simple tips will give you the best bookkeeping system for your small business.
Many people feel that filing their personal taxes can be stressful and frustrating, so the thought of doing it for their business can send them into a sincere panic. In reality, as long as you are prepared in advance, it is really not that scary at all.
Here are a few things you will need to make sure your small business is ready to file taxes:
Keep accurate and up-to-date records
Every small business needs some method of keeping track of the finances throughout the year. Whether you use a manual system, desktop accounting program, or an online invoicing application, there should be detailed and current records of all of your expenses and income. An automated bookkeeping system will work best, since it usually includes all of the financial reports that you will need for tax season. If you enter any new receipts into the system every week, it will take almost no time to print the yearly totals when it comes time to file.
Understand your deductions
Business deductions include everything it costs you to run your business. Office supplies, furniture, travel expenses, and utilities are pretty straightforward deductions, but there are others that you should consider. Do you use your vehicle for work? If so, you can deduct mileage, parking fees, and tolls. Do you have a business loan? If you do, you can deduct the interest. The same can be done if you have a bad debt or credit cards. Whatever it takes to keep your business running smoothly should qualify as a deduction.
Understand tax credits
Make sure to research the various tax credits that are available. The Small Business Jobs Act of 2010 has over seventeen tax provisions that can decrease the tax burdens for small businesses. There are also tax credits within the Affordable Care Act. These tax credits allow small businesses to cover up to 35% of the premiums they pay to cover their employee’s health benefits. If you bring your paperwork to a tax professional to file on your behalf, they will be able to tell you exactly which credits will apply to your business.
Keep personal and business expenses separate
There could be times where you need to dip into your business account for personal reasons or vice versa. This will create confusion at tax time and it will make it more difficult to determine exactly how much your business has made. If you need to bounce back and forth between accounts, keep a detailed record, and bring everything back to even before it is time to file taxes.
Tax season is not fun. There is nothing you can do in advance to make it a joyful experience, but that doesn’t mean it should be a painful one. As long as your records are updated and organized, you understand your deductions and tax credits, and you have kept your business finances separate from your personal finances, there should be no stress or confusion when it comes time to file.
If you are someone who does not like math, don’t let that stop you from handling your business’s accounting. Most modern accounting programs, especially ones from online providers, will do all the calculations for you. All you need to do is enter the amount for the invoice and it will not only calculate that invoice, it will also update all of your critical financial reports.
All you need to do is understand the basic terminology of accounting so you know what everything means. It is important that you regularly review your financial report, both so you get accustom to interpreting them, and so you can identify trends or problems.
There are three major reports you will need to understand and monitor:
Cash Flow Statement
A cash flow statement is the financial report that demonstrates the sources of a company’s cash and how that cash was used over a period of time. This is useful for determining the short-term viability of a company, especially in regards to its ability to manage its expenses. Since the management of cash flow is absolutely necessary for small businesses and it is recommended that an entrepreneur studies their cash flow statement at least once per quarter.
The balance sheet is divided into two parts (liabilities and shareholder’s equity) that must equal each other, or balance each other out. The main formula behind a balance sheet is: Liabilities + Shareholder’s Equity = Assets.
This means the assets (means used to operate the company) are balanced by the company’s financial obligations, accompanied by the equity investment that is brought into the company plus its retained earnings. Essentially, the balance sheet is a quick overview of the company’s financial position at a single point in time.
An income statement (also known as a profit and loss statement) is a summary of a businesses’ profit or loss during any specified period of time. The income statement records all revenues for a business during this given period, as well as the operating expenses for the business to determine whether a profit or loss was achieved.
Regularly monitoring of these three financial reports will give you a clear picture of how your business is doing and whether or not there are opportunities for growth. The meaning behind the figures on these statements can be improved, by cutting back on expenses, and looking for affordable methods of attracting new business. In reality, that is the most basic accounting principle all business owners must understand. There are always ways to increase your income and reduce your costs, but you need to be actively searching for them.
One example of reducing your expenses would be handling your own bookkeeping. It will help you gain a better understanding of your finances, plus you will save money on paying someone else to do it. If you use online accounting software, it will be a matter of basic data entry. Definitely something you can easily squeeze into your day. The more involved you get in your accounting process, the more sense it will make and the better you will be able to use the information to benefit your business.
Is Handling Your Finances Online Safe?
Handling your finances online is as safe as any other method. Identity theft happens just as often with bills that are sent using traditional mail, public purchases, and ATM withdraws, as it does online. Handling your finances online allows you to check account balances, transfer funds, make deposits, make payments, and review important financial reports from the comfort of your office, home, or mobile device. This helps users save time, since they never need to physically make as trip to the bank.
Almost every major bank allows you to manage your banking online. Most of the well-known banks are even introducing useful mobile apps for your smartphones that can make it even more convenient. When you choose to bank online, you will have access to your accounts all of the time, not just during banking hours. You can also achieve this same benefit for your business by using a customer invoicing application or an online accounting provider.
Here are just a few ways you can handle your finances online:
- Verifying your transactions and check your account balance
- Transfer funds from one account to another
- Set up account update alerts for text or email messaging
- Pay your bills online
- Make deposits using innovative smartphone apps
- Manage your bookkeeping using an online customer billing application
- Create and email invoices using online invoicing software
Make sure that you only use secured computers and mobile devices to conduct your sensitive banking transactions, and never click a random link that has been emailed to you from an unfamiliar source. Login into the application or type in the address yourself. When you are finished with your banking or billing, be sure to completely log out of the program.
Is all of our online information really safe?
Unfortunately, there is nothing that is completely safe anymore, but there are precautions you can make that will ensure that your online financial management activities are as safe as they can be, possibly even safer than using an ATM. It starts by being aware, vigilant, and precautionary.
Here are some steps to protect your information:
- Only use websites that you have personally confirmed are secure and reliable. Look for the lock icon and/or a web address that begins with “https://” (the “s” stands for secure). This is not a guarantee, but it is a good indication that it is a secure site.
- Use unique passwords that contain at least eight characters, combining letters, numbers, and symbols. You should really choose a different password for every account, and never use the same password for financial accounts that you use to unlock your computer. Hackers can quickly obtain your computer’s password and then use it log into all of your accounts.
- Change your passwords frequently and don’t ask sites to remember your password for you.
- When you’re finished using any financial site, make sure to log out of the account.
- Keep your computer secure with an internet security software program. I have attached a link to an article that covers many of the more popular options, Best Internet Security – Top 10 for 2013
- Never reply to emails or pop-up windows that ask you to update your security information. Your bank, credit card, or investment firm would never ask you to do that.
- Always keep in mind that any offer that appears to be too good to be true probably is.
As long as you do everything you reasonably can to secure your computer and financial information safe, the benefits of managing your finances online will outweigh any of your safety concerns. The cost and time savings alone makes it worth it, especially since it is actually easier for someone to swipe your mail than it is for them to get into your financial accounts.
How to Manage your Business’s Financial Responsibilities
The bigger your company grows, the harder it will be to handle everything yourself. A company’s finances are the most important factor in their ultimate success, so sometimes it is hard to turn it over completely to someone else. That is why it is essential to never give away full control, even once you decide to start delegating some of the responsibilities. A business owner should always know what is going on with their finances, whether they are managing it or just monitoring closely how it is being managed.
Manage it ALL on your own
If you have a small business that is just starting out, you can try to manage it by yourself for as long as possible. In the beginning, it shouldn’t be too difficult, especially if you take advantage of a cash flow management provider to help you keep tracking of everything online. Set aside a specific time to work on it and make sure that you schedule time to assess reports like your cash flow statement and income statement weekly or monthly. It has to be a priority, not something you try to squeeze into spare moments.
Use a Cash Management Provider for Support
As your company grows, there will be more time-sensitive demands on your time, and you won’t be able to give your cash management the attention it deserves. If you use an online cash management provider, it will save a significant amount of time entering everything, so more time can be spent on analysing the data that is being generated. Online invoicing businesses also give you the convenience of being able to access and review your financial statements whenever the need arises.
Hire a Part Time Bookkeeper or Accountant
If you get to the point that you are not able to keep up with the consistent flow of new invoices, it may be time to hire someone to help out. Depending on how many supplier and client invoices you receive each week, you may be able to get away with hiring someone part time. However, if it is minimal enough that someone could enter everything in only a couple of hours, you are probably still better off doing it yourself. You are still going to want to review it if someone else does it and if you are using an online invoicing company, it shouldn’t take you much longer to enter it onto the form than it would to double check it.
Hire a Full Time Bookkeeper or Accountant
If your company is large enough to require someone full-time, make sure to take the time to research their credibility. Always ask for referrals or testimonials before committing to a personal accountant. It is also important to do spot checks and weekly reviews to ensure that everything is being handle with your business’ best interests in mind.
No matter which option you choose, always keep a close eye on it. There is no one who will want to ensure your company’s success more than you, so it is important that you are involved. Your business’ finances need to be managed and the best person to do it will usually be you.
Time is money and thanks to the internet there are countless new ways for your business to save on both. A company can save a significant amount by taking advantage of free or inexpensive services that are now available online.
Here are some of the current online trends that are enhancing the way small companies do business.
1. Take advantage of free marketing tools like social media
The majority of people in this world are online at one point or another during the day, which is exactly why social media marketing has become so popular, so fast. Having a reputable profile on Facebook or Twitter can spread word of your good service to an endless stream of potential customers with very little money or time on your part.
2. Use marketing automation to generate leads
Marketing automation is an automated program that qualifies leads and then segments those leads into groups based on their interests, demographics, and purchasing history. Once they are segmented, lead nurturing is done by sending relevant and informative information content to each lead segment, in the hopes of building trust and their future business. By using an automated system versus someone manually reviewing each lead, you will save a significant amount of time and money, plus you will improve your conversion rate by up to 50%.
3. Online cash flow management and invoicing services
Small businesses no longer need to hire a full time bookkeeper or purchase an expensive bookkeeping software program in order to keep track of their finances. There are affordable online services where they have pre-set templates that you can use to enter an invoice, email the invoice directly to the client, send a reminder notice, and then send a thank you letter once payment has been received. It will also keep your financial records up to date online, so you can access your cash flow statement or any other necessary report from anywhere that has internet service.
4. Use think free to save all documents online to access them anywhere
ThinkFree is an online service that provides a free web office suite with one GB of online storage. You can use a variety of devices to access and manage your stored documents hassle-free from anywhere in the world. This will give you increased flexibility, so you can work from any computer that has internet access.
5. Use Time Bridge to stay organized
TimeBridge is a new web application that makes it incredibly easy to schedule and conduct meetings. It also allows you to create agendas, take notes, and create follow up after the meeting is over. Since you are most likely working from your computer already, old fashion daily organizers and calendars are no longer necessary to keep track of everything.
These are the top five tools to improve the way you do business, but there are several more advance online tools that can with your efficiency at Top Online Tools to Improve Your Projects and Productivity. So many other great entrepreneurs just like you are constantly working on new ways to improve the way business is done. Reward them for their innovation, but taking advantage of their services and enhance the way you do business in the process.