How to Maintain a Healthy Cash Flow: 6 Easy Tips

Cash flow is the lifeblood of your small business. You need cash coming in regularly to ensure that you can continue operations and pay your staff and bills on time. However, cash flow can be precarious when you’re running a small business and late customer payments or unforeseen costs can cause huge disruption. In addition, it’s normal to expect a temporary period of negative cash flow as you scale up, since you have to spend before you reap the rewards.

So how can you maintain a healthy cash flow in spite of these trials and tribulations? It may sound daunting but it simply requires a little thought and common sense. Read on to discover how to keep your cash flowing.

1. Get Your Invoices Right

Your clients won’t pay you on time if you send out incorrect invoices, and this then has a negative impact on your cash flow. Ensure that all of your information on your invoices is correct and include a pricing breakdown. Make sure that you include all of your payment details so that it’s as easy as possible for your clients to pay you. This saves a lot of back and forth answering questions and fixing mistakes, and ensures that you’ll have money in your bank account sooner rather than later.

Furthermore, it’s important to ensure that you hash out the payment details upfront when you sign a new client. Many business owners often forget this amid all the excitement and then have to waste time sorting it out later. During the onboarding process, make sure that you understand who you should send the invoice to and who to contact if any issues arise. Agree upon a payment date or ensure that the client understands when they have to pay in relation to receiving an invoice.

2. Send Your Invoices On Time

Late invoices result in late payments. You’d be surprised at just how many business owners are lax about sending out invoices, which leads to a multitude of cash flow problems later on. Invoicing your clients on time is a simple yet effective way to ensure that your cash flow stays healthy. If you find it difficult to keep on top of invoicing, set aside time each week to do it or consider investing in invoicing software.

As well as sending your invoices on time, you need to keep on top of payment deadlines and be aware of which clients are yet to cough up. This allows you to send polite reminders to jog their memory ahead of time and chase up any late payments.

3. Review Your Payment Model

If your clients pay 100% of your fees after completion, you’re taking a pretty big leap of faith. It’s wise to require a deposit or upfront payment to ensure that you don’t end up out of pocket.

Additionally, it’s worth implementing late fees to encourage your clients or customers to pay you in a timely manner. They’re less likely to forget or try to delay payment if doing so will incur a charge!

4. Create a Calendar

Cash flow isn’t just about money coming in. You also need to be aware of how much you’re paying out, and when. Create a calendar to keep track of your bills and taxes so that you know when your cash balance is going to take a dip. This allows you to prepare for any expenses and create cash flow projections. It also enables you to make payments on time, which is crucial for maintaining a good relationship with your lenders, suppliers and staff.

5. Create Cash Flow Forecasts

Expanding your business often requires you to spend more than you currently earn, creating a short-term negative cash flow. It’s important to create accurate cash flow forecasts when planning for growth so that you can expand your business in a safe and affordable way, whilst maintaining your current standard of work. It’s no good expanding if you have to completely starve your business of cash to do so.

Creating cash flow forecasts can be complicated, but there are forecasting tools to help with this. The services of a professional accountant can also be extremely useful in creating these projections and adjusting your growth budget accordingly.

6. Prepare a Safety Net

It’s never a bad idea to create a safety net. Ensure that your business has a cash reserve so that unforeseen costs don’t break the bank. Life is unpredictable and no matter how carefully you plan ahead, there will always be unprecedented expenses. An emergency cash reserve gives you some breathing space and means that you can maintain a healthy cash flow even when you have to unexpectedly shell out for equipment repairs, hidden fees or costs that you failed to account for.

Keep Your Money Moving

A stagnant cash flow will not only cause you to lose money, but also to miss out on growth and investment opportunities. If your cash flow is negative for too long, your business will no longer be able to operate. It’s important that you employ the above common-sense strategies to maintain a healthy cash flow and ensure the survival and success of your small business.

5 Bookkeeping Habits to Help You Handle Your Cash Flow

Bookkeeping is about more than just complying with government regulations when tax season rolls around. A solid bookkeeping system provides you with essential information that you can use to improve your business and ensure financial success. According to research by U.S. Bank, 82% of businesses experience cash flow problems, so we have created a list of bookkeeping habits to implement to ensure that your business won’t run out of funds.

1. Monitor Your Transactions Closely

Staying on top of your transactions is the cornerstone of a good bookkeeping system. Each day you should take time to ensure that your deposits and receipts match up. Take a look at whether or not:

  • Cash is being deposited according to the proper schedule
  • Your merchant services fees have changed at all
  • There are any unauthorised payments on your account

Making a habit of this daily review will keep your records up to date and allow you to rectify any mistakes quickly, rather than allowing them to compound.

2. Track Every Single Expense

There’s just no way around it. If you want to manage your bookkeeping well, then you need to track every single expense. Fortunately, this is fairly easy to do when you open a separate business bank account. Your business bank account or credit card will function as a basic accounting system and keep a record of all of your transactions in one easy-to-access place.

Pay with a card, rather than cash, whenever possible to automatically create records. When you pay with cash it’s all too easy to forget to log the transaction, lose your receipt and then have to forgo the write-off when filing your tax return.

3. Check Your Financial Data Monthly

Checking your transactions daily isn’t enough. At the end of each month, set aside time to analyse financial data and identify trends that may affect your business, either positively or negatively.

Tracking your income monthly allows you to see which areas of your business are growing and which are in need of improvement. This also allows you to look at which activities generate the highest return on investment and gather data that may inform a future course of action. This data is also incredibly useful in identifying and predicting seasonal trends.

Daily income tracking is important but going over your numbers each month will help you to see the bigger picture and understand how well your business is faring in the long-term.

4. Invest in the Right Accounting Software

Cloud based accounting software is no replacement for the services of a professional accountant or bookkeeper but it can certainly help take care of the grunt work. Programs like Quickbooks and Xero streamline the management of your financial documents, making it faster and easier than ever to file and organise receipts.

As well as this, accounting software can help automate a lot of your invoicing. You can create a dashboard that will instantly tell you which clients have outstanding payments so that you can take fast action and collect the balance more quickly. Furthermore, you can automate invoice reminders and automatically add late fees to incentivise customers to cough up.

5. Hire a Professional

We’re not sure that this counts as a “habit” per se, but the sooner you outsource to a professional bookkeeper, the better. A professional will offer a keen insight into your current cash flow situation and be able to offer advice on how you can make significant improvements.

Furthermore, a bookkeeper will be able to spot trends and alert you if anything looks amiss.  Although forking out for an added expense may seem counterproductive when trying to improve cash flow management, a professional bookkeeper will save you a huge amount of time and money and protect your business from fines, fees and cash flow problems.

Summary

Cash is king in business, so implement the above habits as soon as possible in order to protect and improve the financial health of your company. It’s hard to plot steady growth when you are continually running into cash flow problems, so if you find yourself struggling to stay on top, don’t hesitate to invest in the services of a professional bookkeeper who can keep their finger on the pulse and the cash flowing in the right direction. 

7 Useful Finance Tips for Small Businesses

Good financial health is crucial for any business, and this starts with careful financial management. However, many small business owners feel overwhelmed and continue to put off the task of dealing with their finances. Tempting though it is, this approach won’t set your business in good stead for the future. It’s important to take charge of your finances today in order to ensure the financial health of your company for years to come. Good financial management always pays off, so follow these useful tips to strengthen your small business.

1. Get to Grips with Financial Statements

Effective money management starts with your financial statements. These are written records of your business performance and financial activity. Maintaining awareness of your business’ financial status enables you to make smart decisions and identify any potential problems ahead of time. Here are the most important types of financial statements you need to know about:

  • Cash flow statements show how much cash is coming in and out of your company. These reports help you to understand your cash position and identify any issues that need to be addressed.
  • Balance sheets are an assessment of your net worth that detail your assets, liabilities and equity.
  • An income statement is a complete picture of your business’ income and expenditures, which is essential to understand whether you’re making a profit or a loss.

2. Create a Tax Plan

Understanding taxes is vital for the financial health of your business. Legally, your taxes must be submitted on time and your statements must be 100% accurate. This sounds daunting, but it’s easy with due diligence.

Careful planning can also help you to decrease your taxes through deductions, and these savings will grow along with your business. If you feel overwhelmed, it’s worth considering whether hiring an accountant could generate a significant return on investment for your small business.

3. Keep a Separate Business Account

The sooner you separate your personal and business bank accounts, the better. Mixing the two can lead to confusion and tax trouble. Opening a business account will help keep your finances transparent and save a lot of time and stress later on. It’s also worth looking into a high-interest business savings account, which can be used to generate equity to invest further down the line. It really does pay to plan for the future.

4. Pay Yourself

Business owners often skip this step during the early days, but it’s important to start as you mean to go on. As the owner, it’s essential for you to maintain good personal finances to avoid ending up in trouble later on.

5. Cloud-Based Accounting Software

We live in the Digital Age, so use this to your advantage and harness the power of technology to streamline your business practices. Accounting is notoriously time-consuming but cloud-based software is a cost-effective solution that can save you many man hours. You’ll be able to access your accounts 24/7 from any device, allowing you to manage your finances remotely for convenience and peace of mind. This type of software also reduces errors to ensure that your data stays accurate.

6. Measure Performance

Keeping a close eye on performance is essential for the success of any business, so create a regular time slot to do just that. Closely examining your expenditures and return on investment (ROI) allows you to make informed choices as you grow your business. You’ll be able to cut down on costs that provide little value to your business and focus on increasing your ROIs.

7. Prepare for Audits

You need to figure out which audits your business may receive so that you can adequately prepare for them. It’s always wise to maintain accurate financial records to ensure that you’re ready for any audit you may face. Learning about different types of audits and the associated selection process can often help you to avoid them, so this really pays off.

Summary

Employing these finance tips from the word “go” can help you small business grow and thrive. Whilst it may be tempting to cut corners, it’s important to see the bigger picture and think about the long-term financial health of your business. Adopting good habits early in the game is key to your success.

How to Choose the Right Virtual Bookkeeper for Your Small Business

Most small business owners are familiar with the idea of a traditional on-site bookkeeper, but could your business benefit from hiring a virtual one instead? There are many benefits to hiring a virtual bookkeeper, since you will receive all of the same services but without the limitations imposed by location and set office hours. Let’s take a look at how virtual bookkeeping can benefit your business and how to find the right online bookkeeper for you.

What is Virtual Bookkeeping?

Virtual bookkeepers handle all the same tasks as their on-site counterparts using cloud-based software. This software allows real-time collaboration from any device, offering you location and time flexibility. This means that you don’t have to schedule office visits and you get to choose from a wider range of professionals, rather than opting for the bookkeeper down the road simply because it’s more convenient to do so.

Furthermore, it’s easier to add additional virtual bookkeepers to your team as you scale up and you won’t have to worry about expanding your offices. This is ideal for fast-growing businesses whose requirements are frequently changing.

How to Choose the Right Virtual Bookkeeper

The ability to choose a bookkeeper from anywhere in the world can make the decision a little overwhelming. Wherever your chosen practitioner is based, it’s important that they demonstrate the following qualities:

1. Responsive

When hiring a virtual bookkeeper, it’s very important to make sure that they are responsive. Since you won’t have regular in-person meetings, it’s important to maintain strong lines of communication. Furthermore, many of your needs may be time-sensitive so you need a bookkeeper who is quick to respond to your queries. Whilst in many ways, the world is your oyster when hiring a virtual bookkeeper, it’s a good idea to hire one that’s in the same or a similar time zone. Make sure to ask a virtual bookkeeper about their contact hours, as well as their preferred channels of communication.

2. Timely

Fast responses aren’t the only thing you’ll need from your virtual bookkeeper. It’s important that they keep your records up to date, rather than creating a backlog of tasks. Make sure that your bookkeeper is committed to tracking your financial transactions and updating your books multiple times per week.

3. Automates Tasks

Virtual bookkeepers who use automation to process your data are likely to achieve faster and more accurate results for your business. Many bookkeepers use artificial intelligence to speed up (and perfect) tasks such as data entry, categorisation and reconciliation in order to create impeccable records in double quick time. This is good news for the financial health of your business and means you are likely to receive your month-end close more quickly, too.

4. Industry Experience

When looking for a virtual bookkeeper, it’s always a good idea to hire a specialist with relevant industry experience. This way, your virtual bookkeeper will already understand the ins, outs and particular quirks of your industry. This can save you both time and money, and reduces the onboarding period since there is no learning curve.

Summary

When hiring a virtual bookkeeper, be sure to ask plenty of questions about their working style to gain a clear picture of what working together will look like. The right virtual bookkeeper will offer your small business a flexible and cost-effective service, as well as skills and experience that are directly relevant to your industry. Furthermore, you will be able to scale the service as your business grows and expands, rather than wasting resources on an in-house hire.

Protect Your Business – The Six Types of Insurance You Need to Have

Worried about what might happen in the future? Business insurance acts as safety nets for any company.

Every industry can have a wide range of liabilities.

A dental practice may not need the same types of insurance as a shoe manufacturer or a digital marketing agency.

However, there are a few essential types of insurance that all companies will need, as mandated by law or otherwise.

Employers’ Liability

This type of insurance covers medical treatments, death benefits, disabilities, injuries, and other potential work-related liabilities.

It’s something every business should have after hiring its first employee. That said, it may not be as necessary if you don’t have any full-time employees.

Professional Liability

Not just service companies, practically every business needs protection against negligence claims. Professional liability insurance can protect against claims of harm or damage as a result of non-performance or mistakes.

As you may expect, your industry will have its own set of standards, concerns, and situations covered under this type of insurance.

Property Insurance

A property insurance policy can protect against a wide range of physical damage. It’s something that businesses need whether they lease or own the property.

Through property insurance, a company can also protect their physical assets like inventory and equipment.

Furthermore, it can protect a business from environmental damage such as floods, fires, and malicious offences such as theft.

Product Liability

Service-based businesses may not need this as much. However, companies that sell products can’t afford to do without product liability insurance.

This can help protect the business from damages caused by the use of its products. It’s a flexible type of insurance that can cover a specific product or a range or category of products.

Business Interruption

One of the most overlooked and undervalued insurance policies. It can cover a range of environmental or even catastrophic events that lead to a halt in operations.

Simply put, a business interruption insurance policy can help keep a business afloat when disaster strikes.

Having this insurance could compensate for lost income when you need it most. However, most companies covered by this insurance are those that have a physical location, like retail stores, for example.

Data Breach

Data breach insurance policies are rather new. But they can be invaluable for businesses that work with vast amounts of sensitive information.

Storing any non-public client and employee data makes a company liable for its security. The insurance could provide protection in the event of a hack or physical data breach occurs.

Consider Bundle Insurance Packages

Insurance can add up, especially when a business needs coverage across multiple areas.

Therefore, some business owners choose bundle packages to save money.

For example, a business owner’s policy or BOP offers a lot of what a company might need:

  • Vehicle insurance
  • Property insurance
  • Crime insurance
  • Business interruption insurance

Such a package may not cover everything, but it covers most and it’s cheaper than getting each policy individually. Speak to an Insurance broker who will find the best policy to suit you and your business.

Every business has Some Risk

No company has zero operating risk. For small companies, one lawsuit can be enough to call it a day.

In this regard, having the right insurance types can be vital in ensuring your success.

Four Tax Preparation Tips to Follow

If you want to avoid the stress of the tax period, follow these four simple steps to prepare your business in advance.

Tax season is one of the most stressful periods of the year for a business owner. With proper planning, however, you can change that.

It’s essential to start preparing for the filing of your business tax return in advance so you have time to gather all relevant records.

Take a look at the following tax preparation tips that can make the upcoming tax season less stressful for both business owners and their accountants.

Organise Your Tax Paperwork

Before anything else, it may be a good idea to sort out any past years’ documents, if you haven’t already. Start organising your books to make sure that you’re prepared when the paperwork starts to come in.

Tax paperwork should be organised by category and you may want to make copies of important documents received by post.

Categorise Your Business Expenses

Another time-saving tip is to start organising and categorising your business expenses weeks before the tax return due date.

You can claim most of your business expenses as tax deductions. But if you’re not sure which expenses you can claim, check out the official guide on HMRC’s website.

All business expenses must be sorted out and explained in detail. Finally, don’t forget to itemise your expenses.

Alternatively, if you outsource your tax preparation, you will want to hold on to all your documents for when it’s time for your accountant or accounting firm to prepare the tax return.

Check Whether You Can Get Deductions and Credits

Small businesses may qualify for a number of tax credits. However, don’t wait till the last minute. Check in advance whether you’re qualified for these credits.

Deductions reduce your taxable income and credits are even better, as they directly reduce the amount of tax owed. Your accountant or tax preparation software will have a list of tax deductions that apply to your business.

Get Help

Tax season is very stressful for your bookkeepers and accounting team, assuming that you have them on the payroll. Even if they’ve been doing great the whole year, they may need some extra help now.

A smart business owner won’t let his or her accounting staff burn out during the tax period. Ask them if they need help and if so, make sure to relieve the burden.

It’s essential to get your tax done correctly and on time, which is less likely to happen if you try to save money on accounting staff during this hectic period.

Advance Prep Wins Out

For most business owners, tax season is far from the favourite time of the year. However, it’s not an excuse for you to wait until the last moment to start preparing your tax return.

To avoid unnecessary stress, the best course of action is to prepare in advance.

It won’t trouble you nearly as much if you’re to find that something is missing, but that’s only possible if you leave enough time to sort things out.

5 Secrets Your Bookkeeper Wishes You Knew

Every business needs a bookkeeper, but there may be something that yours isn’t telling you. We’ve compiled a list of the most common secrets your bookkeeper most likely wishes that you knew to help you save time and money in your business, and get the most out of the services that you shell out for.

1. Don’t Ignore Audits

Of course, no business owner really wants to be audited but that doesn’t mean it won’t happen. Fortunately, hiring a bookkeeper reduces the chance that you will need to be audited and help you to prepare if you do have to face one.

Don’t slack off and forget about your audit trails until you actually have to face one. Be sure to adopt a bill payment solution that automatically creates these trails for you by tracking every action in the system so that your records are as transparent as possible. That way if you do face an audit, you’re far less likely to receive a fine or lose your hair due to stress.

2. Use the Cloud

You’d be surprised at just how many business owners are resistant to adopting cloud-based accounting or bookkeeping software. Cloud-based technology can be used to centralise your financial information and make it accessible from anywhere, at any time. This is a huge time-saver and means that you won’t have to waste time and energy rifling through a crammed filing cabinet to double-check an old invoice.

Furthermore, the cloud offers a range of security benefits. For one thing, permissions-based access gives you full control over which employees have access to certain information. Cloud data is also encrypted and heavily protected, which means that physical damage such as flooding or fire won’t destroy all of your records.

3. Remote Working is the Way Forward

Your bookkeeper no longer needs to do house calls. Virtual bookkeeping services mean that accountants and bookkeepers can do the bulk of their work without setting foot anywhere near your office. Cloud-based software means that your bookkeeper can handle all of their duties quickly and efficiently off-site, increasing flexibility and saving time for both parties.

4. Separate Your Duties

As a small business owner, there’s such a thing as being too trusting. Of course, no-one wants to believe that their employees would steal from them but internal theft is very common. In fact, research by the California Restaurant Association found that 95% of businesses have suffered from some form of employee theft.

In order to prevent this, consider separating duties to limit fraudulent activities within your business. For example, the employee who handles financial transactions should not be in charge of recording them, as this makes it easier for them to misappropriate funds and cover up their fraudulent actions.

5. Avoid Double Data Entry

Double data entry means entering data from one system into another. Not only is this a waste of time, it also increases the likelihood that your records will contain inaccuracies, which could compound and create a big problem later on. Instead, integrate your technologies so that all of your records automatically stay accurate and up-to-date. Speak to your bookkeeper about how to connect your cloud accounting software to your expense management so that your records stay impeccable and you can put your time to better use.

Summary

By implementing the above simple bookkeeping secrets, you can save both time and money in your business. Be sure to take advantage of the power of cloud-based technology so that you don’t waste time on tasks that would be far better automated, or on commuting when you could be working remotely. Finally, remember to separate out duties to protect your business against employee theft and remember to keep your audit trails accurate and up-to-date.