Building a profitable business takes more than having an awesome product/service and paying customers. While product/market fit is great, you will go nowhere fast if you do not manage your business accounting. Tossing receipts in a box does not work; you need to have a firm grasp on your company's fiscal health if you hope to build a business that lasts. If you want to become a better business manager, following are five accounting exercises you should be comfortable performing.
Revenue forecasting is an accounting exercise far too few business owners incorporate into their company's annual operations. Revenue forecasting allows you to have a better understanding of where your business is heading and can often be the impetus to new marketing and revenue generation efforts. Once you have a clear picture of whether your business is heading for increased annual sales, you are better prepared to develop new marketing strategies and sales acceleration techniques to help meet your new revenue forecasts.
If you want to ensure your small business remains solvent, it is imperative you track your expenses. Anything from those office supply expenditures to the business lunches you treat yourself to can affect your overall cash flow. Today's accounting software makes it super simple to track your expenses; it usually takes just a mouse click or two to enter your expense data.
Budget Development and Maintenance
Budget development and maintenance is crucial for small business owners. Without a budget in place, you can be tempted to spend on assets you don't need or purchase inventory you can't afford. Developing a business budget is only your first step; you need to regularly tweak your budget to ensure you and your team are adhering to the spending rules you previously set in place. Monitoring your budget allows you to spot problem areas where you often run into expenditure overages or uncover income opportunities you might have otherwise overlooked.
Speaking of purchasing inventory, asset budgeting and inventory monitoring is another essential accounting exercise business owners you complete. Determine how much you can spend on inventory purchases on an annual basis and try to stick to your budget. Track asset inventory throughout the year; document that laptop purchase, write-off that fax machine donation, and enter that purchase of a new merchandise display unit into your accounting database. It is too easy to forget those inventory details when your fiscal year-end rolls around; document your inventory changes the day they happen.
Profit/loss tracking is vital if you want to ensure you are running a healthy business. If you are monitoring losses on an ongoing basis, you can quickly make adjustments in your sales and marketing strategy to turn things around. Profit tracking allows you to double-down on what is working before competitors catch on to the lucrative niche you have discovered. You will be amazed at how this one simple accounting exercise can help you feel in control of your business.
Small business accounting doesn't need to feel like an overwhelming challenge. Instead of burying your head in the proverbial sand, simple-to-use accounting software like Accounteer can make managing your business a breeze. Will you be making the effort to improve your accounting procedures this year?