A new calendar year means many things to many people. Such as a fresh start on life, a chance to streamline daily routines, or a renewed commitment to goals and relationships. It’s also a time for making, keeping and sometimes breaking New Year’s resolutions. The beginning of a new business year holds the same mix of challenges and opportunities for your enterprise. Think of it as an ideal time to take a good, hard look at how you can improve your profitability and productivity through better accounting and bookkeeping practices. Here are some places to start creating smart financial practices.
If you’re like many business owners or managers, you’ve maintained the same set of professional vendors and service providers. Maybe for as long as you can remember. Familiarity doesn’t necessarily breed contempt, but it can certainly encourage complacency. Your lenders, internet providers, product suppliers, shippers and other business vendors may have jacked up their fees or rates. Meanwhile they have cut back on quality, making incremental changes that have left you with less service for your money than when you first launched these relationships. The beginning of the year is a sensible time to shop around and see whether you can do better. With any luck, your current vendors will work to keep your business by matching those competing bids. If they don’t, then you’re probably better off cultivating new relationships.
No matter how scrupulously you record each financial transaction or how many reports you run, you can easily get the wrong notions about your business’s status, making the wrong choices as a result. All accounting methods are not created equal. And some give a clearer picture of certain financial aspects at the expense of others.
Cash accounting versus accrual accounting is a good example. The cash accounting method operates on the same principles as balancing your household checkbook. By recording the money your business receives or spends in real time. By contrast, accrual accounting records transactions based on the date of the sale or purchase, regardless of when you actually receive or pay that money. The former gives you a clearer idea of your current financial status. The latter gives you a clearer idea of how your business is performing over time. You may need to switch from one method to the other — or start using a combination of both.
Sloppy payment and invoicing practices can also leave you with a misleading or incomplete picture of your business’s finances. Not to mention putting you in deep trouble with creditors (who judge your worthiness based on your balance sheets), impatient vendors, and angry employees or customers. You can rid yourself of these headaches in the new year by adopting automated accounts payable software and services. The automated approach helps ensure that invoices and payments go out on time. And to the right people, every time, without fail.
Did you get into a big scramble to assemble your tax records into credible condition for your CPA? If so, you may have been unpleasantly surprised. Not only by the numbers presented to the IRS, but also by the size of your CPA bill. The messier your documentation is at tax time, the more hours your CPA firm must labor to make sense of them. Resolve right now to keep abreast of tax filings and documents as they pop up throughout the year. Start with the employee prior-year wage/tax reports and employer quarterly filings that come due in January. If you require more bookkeeping resources than you currently have on your own staff, outsourcing to third-party professionals can make all the difference between staying caught up and getting hopelessly (and expensively) confused.
Stop and take stock of your accounting and bookkeeping situation. It could prove a crucial step toward a more profitable 2018!