As a small- to medium-sized business owner, you have to keep close tabs on bookkeeping and accounting. Debt management is essential to prevent cash-flow problems, invoices must be sent out in time and you need to follow up on debt owed by clients. At the same time you must ensure that you stay on the good side of suppliers by paying your accounts on time. Interest on loan accounts can seriously affect the ability to pay suppliers and salaries.
If you don’t manage the expenses properly pretty soon you’ll find that the company cannot operate. Once at this position, it spells death for your business. Making use of outsourced professional accounting services and help is the first step in gaining control over the business finances.
Of course, making use of our full range of accounting services and help with taxes and payroll management will help you to lower expenses, reduce the risk of fraud, ensure compliance with statutory requirements and make accurate forecasts. For now, let’s look at responsible accounting approaches to help you avoid costly pitfalls.
Why it is Essential to Keep Receivable Payments Separate
As a small business owner you may have borrowed money to start the business or to expand your market. Keep the receivables separate from the income generated through loans. Unless you do this, you will end up with too much debt and interest and struggle to pay back loans.
Debtors Mean You Don’t Yet Have the Money
If you have many clients with accounts follow up regularly. Leaving outstanding accounts will lead to bad debt on the part of the clients. This in turn can cause serious cash-flow problems for your business. Make sure the clients pay on time and regularly pay their accounts. Don’t send out orders to clients that are behind in their payments. Note that money only counts when it is in your business bank account.
Doing it Yourself Versus Employing a Bookkeeper
One mistake that small business owners often make is to handle every possible task themselves in order to save on costs. However, unless you have the expertise of a bookkeeper, you will make costly mistakes and doing it yourself also means having to stay up to date with accounting practices. In addition, it will take time away from the actual running of the business. Every minute you spend in doing the books is time away from marketing, building customer relations, branding and developing strategies.
You should be the one analysing the financial statements in order to forecast, budget and strategise – not the one that works 12 hours a day and then doing the books late at night. If this sounds like you then you also know how easy it is to put off doing the books. This, in turn, makes decision making difficult and because you don’t exactly know the extent of your expenses you can easily over spend, leading to a cash-flow situation.
However, hiring a full time person to handle the bookkeeping function means an additional burden on the payroll and more personnel administration. It means another person for which you need to make SDL, UIF and other payments and must manage leave etc.
You will then have to trust that the person follows the correct procedures in bookkeeping and accounting, but you will at the end of the day still be held responsible for their mistakes. In addition, payroll and accounting fraud are risks to consider. Another person on the payroll also means extra office space, higher communication costs etc. – all adding to cost to company.
Outsourcing the Accounting Function
Another solution is to hire a bookkeeper or accountant once a year or every quarter. This can be an expensive endeavour and, in many instances, you will still need to do all the accounting with the professional only signing off on the books. The best approach is to outsource the accounting function to professionals such as The Tax Shop franchisees that are qualified, have the human resources and follow best practices. In this way you get professional accounting services and help whether with the drafting of financial statements or the monthly bookkeeping, payroll management and tax submissions.