How To Improve Your Small Business' Financial Health
Are you a budding entrepreneur, small business owner, or manager searching for ways to improve your organization’s financial health? Well, look no further. One time-tested remedy for any economic malady is the use of small business accounting practices. Small business accounting practices are established policies and procedures for successfully monitoring an organization’s finances. They provide owners and managers with the tools to manage assets and inventory while evaluating cash flows, solvency and overall economic performance.
To kick-start an organization’s road to economic recovery and insure its long-term financial health, here are four simple small business accounting practices that should be implemented:
Small Business Accounting Practices.
1. Create a budget. A budget is a formal document that reports an organization’s expected revenues and expenses and lists all projected operating and financial transactions, usually one year in advance. Budgeting is particularly important for small businesses because resources may be limited. A small business should create an operating budget for day-to-day activities that includes sales, inventory and other expenses, as well as receivables and collections.
2. Create a balance sheet. A balance sheet is a formal document that lists all of an organization’s assets and liabilities. Assets include cash, receivables, inventory, equipment, etc. Liabilities include loans and accounts payable. At a glance, an owner or manager should be able to look at a balance sheet and determine what an organization owns and owes.
3. Create a daily ledger. A ledger is a record of sales and expenditures. Consider an electronic inventory management system that will track when and how much you purchase, sell, and have on-hand.
4. Reconcile your bank statements each month. At the end of each month, you should compare your daily ledger, receipts, and invoices with your bank statements. This will allow you to quickly locate any mistakes and correct any discrepancies.
Implement these four small business acccounting practices and improve the financial health of your company.