Ever wonder what your accountant might recommend that you do differently in your business? What are some of the accounting best practices that could increase your bottom line? I have collected some of the juiciest tips to save your business time and money, and keep things accurate and up to date. You may be surprised to see that some of the best practices here don’t have to do with data entry into QuickBooks, but instead financial practices that can help you avoid major money pitfalls, and build more wealth in your business.
1. Evaluate your fees/prices at least once per year; don’t go more than 2 years without an increase. This is a challenge for some companies. Especially when times are tough you don’t want to scare anyone away with raising prices, but you also don’t want to find out at the end of the year that things have changed and the business made zilch. Make it a practice to review prices at the same time every year, and do a price adjustment when warranted.
2. Bill on time. This seems very basic, BUT many businesses get caught over extending credit to customers, and experiencing defaults or disputes simply because collection was late. Accepting credit cards is a great idea no matter what kind of business you have, because it gives your customers two options – pay up in cash or pay up on credit. With everyone staying on schedule you are providing better service, and keeping your balance sheet looking pretty.
3. Stop running to the bank. Use RDCs (remote data capture) machines to scan your daily deposits. If you insist on going to the bank, go at least once weekly. Ensure you don’t lose checks (someone once left a $7500 check in a file and found it 4 years later – gut wrenching!).
4. Don’t let money go stale. Transfer idle cash balances from your checking to savings account so it earns interest, and can help your company save more because “out of sight is out of mind.” You also may want to look into sweep accounts.
5. Play detective. Employee fraud is easier to commit in small business. Whether it’s supplies pilferage or overstating expense reimbursements: scrutinize timecards; separate check-writing duties from billing and deposits and bank reconciliations; to deter or avoid temptation, make sure employees know you’re looking.
6. Cross-train everyone in your accounting department. Lack of cross training leaves a business reliant on one or more specific individuals, and that’s not good. You always need to think about the “get hit by a bus scenario.” You never know when a staff member will need to leave your employ, fall ill, win the lotto, etc. So, cross-training is safety for your business.
7. Mark-up all pass-through costs at least 20%. Regardless of whether you run a construction business, or a tutoring business, many businesses by supplies or materials needed on the job. If you purchase things on behalf of your customers then add a 20% markup to cover your overhead and add value.
8. Send bills through the Internet; no more snail mail. Not only does this save you postage, but very costly late fees, and even maybe gain you early payment rewards (like 2% for paying by the 10th).
9. If you or your partner are going to run the books yourself, take a class! I have seen instances where one minor mistake in running a report for depositing sales tax resulted in over $10,000 in taxes, fees and penalties. Get your skills in order before taking on such an important task.
10. Review Balance Sheet and P&L at least once a month. Drill down to investigate questions. Was there a change in sales? Did your expenses meet your budget? Identifying trends, problems, etc. early will help you nip it in the bud, and steer your business in the right direction.
11. Reduce costs – Don’t spend money without a return on that investment. This one might be a no-brainer too, but the relationship between costs and business investments can be very tricky on the mind. Yes, a new fangled color copier that slices and dices will give you the ability to create your own marketing materials, BUT the $10,000 lease that it will cost you could buy an awful lot of professional design and printing help. Scrutinize everything.