Accounting software has lifted weight off the shoulders of CEOs worldwide. Gone are the days of writing out every transaction and calculating by hand all necessary figures. We now entrust these duties to our software systems.
And while this saves time, it also puts business owners at a distance from their finances. Because continual oversight is not required, errors may arise and go long undetected (at a severe cost to your company).
Keep your money from falling through the cracks by taking a more hands on role in these four areas of your business:
Invoicing: Most businesses deal regularly with two types of invoices: customer and purchase. Chances are your dealings with each are limited to either sending (customer) or receiving (purchase).
Unfortunately, with regard to customer invoices, simply sending word may not be enough to ensure payment. Clients may be pressed for cash or simply forgetful, and neglect to pay you on time (if at all). Contact these customers and inquire about their delayed payment. Remind them of your terms and the consequences for not abiding by them.
When you receive purchase invoices, don’t automatically file them away. Double check the charges and make sure you’ve actually received all products you purchased. An accidental 0 added by your supplier may result in $1,000 cost to you.
Balancing accounts: Just as you (hopefully) do your personal bank account, reconcile your business accounts. Though you can trust your software system to make correct calculations, you can’t account for human error. Perhaps you initially entered a $500 purchase as $5,000. Your software won’t catch this, but you can—and save yourself a lot of undue worry by doing so.
Cash: Cash is the one thing you can’t rely on software to monitor (good luck jamming $50s into your screen). Retailers, restaurants, and all businesses that deal directly and routinely with cash need to pay close attention to it.
When handling cash it’s simple to slip up. Bills fall through fingers, stick together, and get lost among clutter. So slow down when making transactions and talk to your employees about the importance of doing the same.
Today’s registers aren’t this daunting, but mistakes can still be made.
Hold staff accountable to being attentive to cash by balancing tills after every shift. Require that two people sign off on the balance sheet to decrease the odds of negligence or theft. Another easy way to enforce compliance is to place a camera over the till.
Sales: Before you actually begin to sell anything, you need to determine how you will account for sales. Sales revenue does not equate with income. You may find yourself with extra cash on-hand after cutting staff or selling the company van. These are not sales transactions.
Determine what it is you’re selling (be it legal services, written content, or pizza) and track sales only in terms of this measure.
If you earn on commission, your sales revenue will only be a percentage of the total sale and you’ll need to account for that.
Though becoming more engaged in these areas of your business will demand some time, a lot of the energy you put in will be up-front. Once you’ve established these procedures, your work will mainly be limited to monitoring their effectiveness.
For tips on how to avoid other common accounting mistakes, refer to this list from Tweak Your Biz. You’ll be surprised by the circumstances at which cash falls through the cracks.
If you don’t have the time to monitor your accounts yourself, consider hiring an outsourced accountant. Our start-up accounting and CFO services experts can assist you in not only establishing, but monitoring these procedures.