Category: business management

Understanding 7 Functional Areas of Business

When it comes to running a company, you need to have a solid understanding of the key functional areas involved. Every healthy organization operates like a living organism and there are functional areas which ensure that it achieves all its objectives.

These key functions encompass a range of areas affecting things like employee training, the acquisition process, company size, management styles, marketing strategies, customer service, employee relations, supply chain management, company policies, distribution channels, effective project management, organizational structure, production planning and much more.

Whether you are a new entrepreneur or have been running a business for quite some time now, it is crucial that you know these 7 functional areas of business. To provide you with insight into the core of your organization, we’re presenting this informative piece. We’re confident it will help you better understand the underlying processes that keep your business growing.

1. Strategy

One of the most important functional areas of a business is strategy. Every organization needs to have a clear strategy in order to ensure that it moves in the right direction. Top management teams spend a great deal of time working on the development of a strategy that makes sense for their market. It is normally headed by the CEO or COO. Then, corporate policies are created and conveyed to all staff members through in-depth training and follow up, and through company communications and initiatives. These policies dictate just about everything, such as paying rent, handling business licenses, ordering office supplies, marketing, and even recruitment.

No matter the size of your business, there is great need to develop a strategy that takes all major areas of your business into account. It can best be described as a clear set of goals, actions, and plans that outline how an organization aims to compete in a specific market. In fact, entrepreneurs need to present a strategy to creditors so they can get the funding they need. It is impossible to run a business without a proper strategy.

Your strategy needs to be evaluated from time to time to ensure that everything is going according to plan, as much as anyone can ensure that in a complex world. A good strategy allows you to follow a path while remaining adaptive and agile enough to navigate changes, market fluctuations, shifting demand, and unforeseen events.

2. Finance

Another integral functional area of a business is finance. It is impossible to run a company without funds and preferably, good money management. Organizations need to have some form of financing. You must monitor cash flow and strategize so that you use your resources wisely. This functional area requires a great deal of time and focus.

To get your finances in order, you must have a dedicated account and finance department, or just as good, an experienced bookkeeping service provider. It is essential for maintaining books and accounts. You need to be on top of all accounting tasks to avoid issues down the road. If you want to prevent a situation where you are unable to pay bills, where you miss taxes, or default on loans, you must take your finances seriously and put together the support and resources necessary to this function.

3. Marketing and Sales

Regardless of which product or service you provide, you have to generate demand if you want to increase sales. In order to do so, you have to get the word out about your offerings. This is where marketing and sales come into place. They go hand in hand and allow you to maximize your earning potential. It is in your best interest to create a dedicated staff for handling client communication, including complaints and feedback.

Through marketing functions, you get to provide the best customer experience and keep everyone coming back for more. The marketing department works with other departments to achieve its objectives, using the latest technologies, social and digital marketing practices, savvy advertising practices, and substantial analysis.

Generally, marketing and sales are combined as one informs the other. The marketing department manages brands, develops company messaging, creates the look, feel, and voice of your brand(s), establishes communication pathways across several channels, and works to not only build, but keep customers for the long haul.

On the other hand, the sales department will focus on selling your products or services. This involves different levels of sales, sales management, and sales and customer support. Both marketing and sales personnel will allow you to keep up with the latest market trends and practices.

4. Production and Operations

The production and operations department oversees the production of goods or services. Regardless of what you sell to your target audience, you must have a functional department that is responsible for production.

For instance, if you offer physical products, the production department would handle the manufacture of these goods and ensure quality standards throughout. As for businesses that offer a service, there will need to be a person or team responsible for managing operations on several levels.

Also, the production department has to manage inventory and place supply orders before inventory runs out. No matter how complex it might be to run an organization, the production and operations department will work to increase efficiency and productivity levels. Your team will monitor equipment and perform the necessary repairs. In order to look after production, you need to train existing staff and hire new workers to keep your manufacturing system working.

5. Research and Development (R&D)

Businesses cannot expect to continue developing and growing without research and development. It provides vital information and insight, enabling you to make improvements to existing products or services and come up with new offerings. In fact, research also helps reduce costs and increases efficiency. Research and Development requires a solid investment of time and money, but it’s worth it. Organizations that take R&D seriously, adapt quickly, innovate continually, and meet their customers’ needs.

As the world of business continues to get more competitive, you simply cannot overlook research. You have to find new ways to do things and come up with things that no other company offers or offers quite like you. There is a lot that goes into research. You have to look beyond your current boundaries and take advantage of new technologies and creative thinking. This will ensure you overcome current limitations, meet business goals, and continue to grow as markets and consumer habits change.

6. Employment and Human Resources

If you want your organization to be successful, you need to recruit the right people and ensure they stick around. This is where the employment and human resources department comes into focus. Unless you’re running the entire organization on your own, you require dedicated staff to manage, equip, and enable your people to have the support system they need to remain successful.

A dedicated human resources department will ensure everyone works toward the desired outcome. It will structure company policies as well as maintain consistency so that communications are clear and every staff member is treated equally. Human resources helps manage the application process, organizes personnel files, deals with employee concerns, and works to improve communication between individuals and between departments.

7. Insurance and Risk Management

Lastly, insurance and risk management are key functional areas that business owners must never overlook. Every company faces risks and has to focus on safeguarding itself from financial losses. There are various factors to keep in mind, such as accidents, theft, natural disasters, cybersecurity threats, various liabilities related to materials, production, and facilities, along with the safety and function of your products or viability and consistency of your services.

Insurance is vital, as it can help minimize financial losses caused by these threats. The insurance and risk management department will strive to protect your business from significant financial risks. They will pursue the best insurance plans to shield your main vulnerabilities. Also, it will prepare the company for difficult situations with training and information to help individuals refine their choices, behaviors, and habits to minimize risk to themselves and the organization. Is arguably one of the most important departments in your business.

Conclusion

Every key function of your organization holds secrets to maximizing the quality of your business activity, achieving your goals, meeting your business plans, and keeping all departments in top form. It is imperative you understand the differences between departments and that you equip and develop each function so that every pillar in your business remains a strong part of your foundation.

Success takes firm ground to build on. It also takes creativity and an agile approach. Investing in each functional area of your organization will keep you right where you need to be to meet every challenge.

Sound Accounts helps business owners make better decisions and achieve more with excellent bookkeeping management, uniquely tailored for each organization. Connect with us today to discover the difference Sound Accounts can make in your business, and find out how to qualify for 6 months of free QuickBooks.

For more information on the functional areas of business, check out our frequently asked questions below.

FAQ

What is a functional area of business?

In the simplest terms, a functional area of a business is a key department that every organization needs and can’t operate without. Some examples include finance, marketing, R&D, and human resources.

How do functional areas work together within a business?

The functional areas of a business are like parts of a human body. And just like the human body, each one performs a unique function while every part needs the other parts to function together as one.

What is the importance of business functions?

Business functions are crucial as they enable an organization to compete with major players, meet their goals, and remain relevant in changing markets. They also help business owners reduce risk, avoid errors, make the most of your finances, build brands, communicate effectively, and stay relevant.

Why is IT necessary to evaluate different areas of business operations?

We live in a modern and digital world, one that requires us to make the most of available data. IT has become an integral component in analysis and decision-making. It allows organizations to evaluate the performance of every department and customer behavior.

Technology is constantly evolving, and new tools are emerging all the time. It’s important to use technology, sound financial management, and bookkeeping to lead your organization with clarity and confidence.

October 26, 2022
5 Secrets for Small Business Management

As a business owner, when you launch a business, your first goal is likely to be growth. However, you need to understand that growth takes time. You can’t expect to get results overnight. Instead, you have to be patient and dedicated to your venture to ensure that you don’t miss important opportunities, opportunities that allow you to meet your business goals.

If you want to get ahead of your competitors, ensure that you thrive, and be among other top business leaders, there are certain secrets that you should know. Business success means understanding business finances. But it is much more than that. This is where our post comes in handy. We’ll take a look at some essential tips for small business management. Here’s how you can accelerate your growth in no time.

1. Hire Top Talent

One of the secrets to managing a small business is hiring top talent. Although it costs money to recruit experts in the field, it pays off within a short time. If you are interested in establishing your organization as a major player, get the right people on board. Having a solid team will work wonders for your organization and allow you to achieve all your goals. No matter how much experience you might have in your industry, you could always use extra help.

A surefire way to grow your business is by hiring the best people. It will allow your business to head in the right direction, to remain innovative and creative no matter what business model you operate by. The truth is that there is nothing you cannot achieve when you have the right team by your side. Quality people means smooth business operations, great customer acquisition, customer loyalty, and an entire team working toward strategic business development.

Having hard working individuals will move you toward success much sooner. Also, it is vital that you delegate tasks so that you can focus on making decisions. You should be able to create a collaborative environment and get everyone to participate in helping your organization succeed.

By getting the brightest minds to work for you, your business will gain a competitive edge over major players and build lasting customer relationships. In fact, you will be able to expand your operations and enjoy a bigger piece of the pie. There is no limit to what you can achieve when you recruit top talent. It is worth keeping in mind that many people are interested in working at a startup despite the lower pay, as it allows them to gain skills they would otherwise miss out on.

2. Be Adaptable

Another secret to succeeding in the business world is being adaptable. Keep watch over the business climate and keep up with the latest trends. What makes managing a small business a lot easier is the fact that you can easily adapt and put the most recent developments to good use. By switching directions to respond to changes in the market, you can rest assured knowing that you will win more customers over.

Having an agile approach in small business management should be your top priority. It is easier to be adaptable when you have a small business. There is no excuse for you to overlook the newest trends, and to spend a bit of time researching and testing them to determine which ones will fit with your model.

Look out for advancements in your industry and adopt them when they refine your company’s operations. Thus, you will be able to grow quickly. When you adapt and change your approach, you get to try out new ideas and find out what works best for you.

To connect with the crowd, you should look out for the most current pop culture trends, key marketing strategies, and social media tips. Be a part of a wider community to connect with your audience. As we live in the information age, you have to take advantage of everything that the internet offers. It will ensure that your brand reaches its full potential.

3. Focus on Customer Experience

If you want to expand your operations and keep your existing customers, focus on customer experience. The perception customers have about your business directly influences your success. This is why it should be a top priority for you to deliver a quality experience each time. This will ensure customers regularly sing your praises and recommend your business to others. There is no better way to increase your growth rate.

By keeping your customers happy, you will encourage them to keep coming back for more. You will increase revenue and profitability.

Whenever a customer chooses your company for a product or service, reward them by providing the best experience that they could ask for. Unlike larger companies that struggle to respond to customer needs in a timely or genuine manner, small businesses have a competitive edge and can easily exploit it to meet the needs of their audience. You need to introduce innovative products and services and support these with consistent attention to your customers’ satisfaction, to develop long-term relationships with customers. Nurture your followers and show them they made the right choice.

No matter which industry you might be in, listen to your customers. This allows you to show them you actually care about their needs. Since customers have ever-changing tastes, diversify your products or services to cater to them as long as it fits with your business and with your values. Your main purpose is to serve your target audience.

Focusing on offering a superior customer experience will make your business stand out. You have to exceed their expectations. Going the extra mile makes all the difference.

4. Leverage Social Media

For better or worse, social media has taken over much of our lives. If you want your business to succeed in the digital age, you have to leverage social media. You can get started by creating a profile on all major social networking platforms, such as Facebook, Instagram, Twitter, and TikTok. However, you will also need to be active on social media to connect with potential customers. This means you’ll need to post regularly and interact with others. Besides, being active on social media shows you care about your customers and are committed to providing them with vital information and new experiences.

Moreover, you can encourage your target audience to share your posts online and get their family and friends involved. The more people talk about your company, the better. It will allow you to grow your presence and become a household name. It doesn’t matter how small your business might be, as social media can help catapult any organization when used right.

5. Invest in Yourself

Lastly, you have to invest in yourself if you want your business to succeed. Since there are many things that you are likely to be unfamiliar with, put in the effort and learn as much as possible about the business world. Enroll in courses and find out how you can grow a business no matter what stage you’re in. When you invest in yourself, you will know how to make the right decisions and avoid making costly mistakes.

It is vital to invest in yourself if you want your business to head in the right direction. Although you might be tempted to spend profits on other things, take time and the necessary resources to educate yourself. There are plenty of courses, books, blogs, and mentors out there that can help you reach new heights of knowledge and success.

In Closing

Business management takes a range of skills and a depth of knowledge. You have to balance business and personal finances, make strategic marketing decisions, gain customer loyalty, use the right technologies, hire good talent, and remain innovative. You’re not alone though. There are plenty of consultants, mentors, resources, and educational programs to help you continue to grow.

No business owner is perfect. We all have strengths and weaknesses. But if we each apply the basic principles of sound business management consistently, our chances of growth and success increase much more.

Sound Accounts helps business owners in every industry achieve greater success with bookkeeping service plans tailored just for them. Connect with us today to learn more about the difference Sound Accounts can make and see if you qualify for 6 months of free QuickBooks.

To learn more about managing a small business, check out our frequently asked questions and answers below.

FAQ

What Is the Secret to Success in Business?

There is no one single secret to succeeding in business. It takes a range of things, including excellent financial management, great talent, a unique idea, quality products and services, awesome customer service, a creative and innovative approach, and confidence, among others.

What things should I avoid when running a business?

There are many pitfalls to avoid. Some of these include poor financial planning (bad bookkeeping), overspending, mixing personal and business finances, not putting together the best staff possible, taking out bad, high interest loans you can’t afford, making promises you can’t keep, and ignoring your customer’s needs and suggestions.

What Are 5 Skills of an Entrepreneur?

5 of the most important skills that every entrepreneur should have include sales, the ability to learn, communication, empathy, and a mindset for strategy.

What Is the Best Strategy for Small Businesses?

If you are running a small business, consider targeting a specific niche. It will provide you with a competitive edge and ensure that few if any other companies target them.

October 19, 2022
How to Create a Small Business Budget in 5 Easy Steps

Running a small business requires a great deal of effort, ongoing dedication and a clear business plan. However, if there is one secret to success you can’t forget, it is budgeting. You have to create the right small business budget to ensure that you don’t fall behind, that you manage your business expenses wisely, and that you reach your business goals year after year.

Although it can seem intimidating at first, it is easier than you think. You need to know what to include in your budget and what to leave out. Since many small business owners fail to create a budget, it will help provide you with a competitive edge. To help point you in the right direction, we have created this informative post just for you. Let’s get into it right now.

Why Do Small Businesses Need a Budget?

Before we look at how you can create a small business budget, it is important that you understand why you need one in the first place. The fact is that preparing a budget allows you to make an educated guess about the future of your organization. It involves examining past performance to get an idea about what lies ahead. Then, you can use that information to make the right financial decisions both today and in the future. Preparing for the uncertainty allows you to minimize expenses and focus on how you can get more done. It also reduces risk and ensures that you continue to do what you do best, month to month, and year after year.

Even though the budget would not be entirely accurate, it would ensure that you have an idea about how to run operations smoothly in the coming months or even years. If it is your first time creating a budget, you will need to put in extra effort, after which you will have an easier time preparing it.

Every successful business understands the importance of a budget, just as much as they understand how vital it is to grasp cash flow, monthly costs, bank statements, business revenue, advertising costs and other common financial aspects of their business. It enables you to identify leftover funds which you can reinvest into your company, predict slow months, reduce debt, and keep operations in order.

5 Steps to Creating a Small Business Budget

Here’s how you can prepare a budget for your small business.

1. Examine Sales Revenue

The first thing that you need to do to get started with creating a budget is to examine your sales revenue. You have to look back if you want to move forward. Take a close look at all your income sources and add them together to ensure that you have an idea about how much your business can generate every month.

When determining your income, you have to focus on revenue instead of profit. For those of you that don’t know what revenue is, it is all the money your business generates before expenses have been deducted. The remaining amount after expenses have been deducted is profit. However, you need to focus on income and not profit.

After identifying all your income streams, you just need to calculate your monthly income. You will have to do so for multiple months. Generally, you have to consider the last 12 months and put all available data to good use. Keep in mind that your company will often experience a drop in revenue right after the holidays, depending on the nature of your business. Therefore, you will have to manage your finances accordingly.

2. Remove Fixed Costs

When creating a budget for your small business, you need to subtract the fixed costs. This is why you will have to add all the fixed costs and then remove them from the budget. Fixed cost refers to any cost that is incurred on a recurring basis by a business. It is possible for fixed costs to occur yearly, monthly, weekly, or daily. Some of the fixed costs that your business might incur include rent, debt repayment, supplies, payroll, insurance, taxes, and depreciation of fixed assets.

It is worth keeping in mind that every business is unique and will incur different fixed costs. It is due to this reason that you should take some time to evaluate all the expenses that you do incur. It will allow you to identify all the fixed costs and remove them from the budget.

3. Determine the Variable Expenses

Next, you have to go through your data to find out all your variable expenses. It will make it a lot easier for you to create a cost saving budget for your small business. Chances are, you might have already identified the variable expenses while you were working out the fixed costs. Unlike fixed costs that remain mostly unchanged, variable expenses are incurred depending on usage and are usually essential for every business. These are apart from unexpected expenses and include things like raw materials, packaging supplies, shipping costs, credit card fees, commissions and more, which are expected but vary from week to week and month to month because of shifting market demand, availability, production costs, shipping, and a host of other factors.

There are also some expenses that might not be necessary but allow you to boost profitability like extras. These are known as discretionary expenses and are included in variable expenses. Other examples include marketing costs to build your customer base, professional development, office supplies, replacement of equipment, and owner’s salary.

During months where you are likely to generate less revenue, you will have to reduce your variable expenses. You will first have to minimize discretionary spending. On the other hand, you can increase variable expenses during more profitable months if needed. Hence, you have to classify your expenses and rely on them to create your budget.

4. Prepare a Contingency Fund

No matter how careful you are, your business is likely to incur unexpected costs. In order to keep your business afloat, you will have to set aside a contingency fund. There are onetime costs that may occur periodically. Therefore, it is in your best interest to be prepared. You never know when your equipment might stop working and require repairs. Similarly, you might need to invest in a newer software application.

Since costs can arise when you least expect them, you could use your contingency fund. This backup plan will ease your stress and allow you to keep functioning successfully during leaner seasons. This will help you with smart financial planning, as your emergency fund will enable you to avoid taking out an expensive loan. Planning for contingencies will allow your business to keep running when the going gets tough. It is simply smart budget planning.

Now, you might be tempted to spend any additional income you generate. But it is vital that you have an emergency fund. It will allow you to pay for repairs and hire a professional to avoid unnecessary closure. If you think that a business loan could help you out, you could not be more wrong. It would affect your ability to keep operations afloat. By budgeting for an emergency, you would be best prepared for it. Thus, you will have no trouble handling it even if it appears.

5. Make a Profit-and-Loss Statement

After you have collected all the information, you have to make a profit-and-loss statement. It is quite easy to make. As you have already done everything, the entire process should take minimal time. Simply add the income and subtract the expenses for the month. If you get a positive value, you will generate a profit. Making a profit-and-loss statement is vital, as it will help you with strategy and better decision-making. This form, as with all financial statements, has various purposes and needs to be analyzed from time to time.

Conclusion

Creating a budget for your small business is something you simply can’t ignore if you want to experience consistent growth. It enables you to get your finances in order and prepares you for the future. No matter which industry you might be in, budgeting and financial planning remain at the top of a long list of practices every high-level business owner needs to master.

By following the steps mentioned above, you should be able to create a business budget in no time. The more you familiarize yourself with budgeting and bookkeeping concepts, the easier the process and management of your budget will become. Work with an experienced bookkeeping service provider to help you master sound financial practices and keep your books in order so that your money can fuel your continued growth indefinitely.

Sound Accounts helps business owners achieve greater control over their business and strategic growth with individually tailored bookkeeping service solutions and sound financial advice. Contact us today to learn more and find out if you qualify for 6 months of free QuickBooks.

FAQ

How Do I Create a Budget for My Small Business?

Creating a small business budget is easier than you think. An important initial step is to go through your accounts and identify all your income sources. Then, add these up and subtract the value from all the expenses that you are likely to incur. Other steps to tackle are determining fixed costs, including variable expenses and predicting one-time costs, and putting it all together to create a budget that works not only today, but can adapt as your business changes.

What Is the first step in setting up a budget?

The first step to creating a budget is going through your sales revenue. It will allow you to get an idea about how much money you can generate in a certain period. Then, you can identify your expenses and calculate how much cash you will have left by the end of each month.

What are the 3 types of business budgets?

The 3 main types of business budgets include a master budget, an operating budget, and a cash budget. A master budget includes other lower-level budgets created by different functional areas of a business. Every business creates a master budget to ensure that everything is taken into account. On the other hand, an operating budget focuses on subtracting operational expenses from the revenue generated during a given period. As for the cash budget, it only includes cash transactions and removes debts.

October 12, 2022
9 Simple Bookkeeping Tips for Small Business Owners

Every successful small business knows the importance of financial management. If you want to get ahead and avoid unnecessary issues, you have to focus on bookkeeping. There is no need for you to be afraid of it. In fact, it is easier than you think. No matter whether you have experience in accounts or not, there are some basic bookkeeping tips that you should know. In our post, we’ll cover these tips to help ensure that you can create an accurate accounting system. So, without further delay, let’s dive right in.

1. Keep Personal and Business Finances Separate

One of the most important bookkeeping tips that small business owners should know is keeping personal and business finances separate. The last thing you want is to mix things up for yourself. Every business transaction should flow through your business account. There should be no room for personal transactions. Similarly, you should not use your personal bank account to pay for business expenses.

No matter how small your business might be, it is highly recommended that you keep your personal and business bank accounts separate. When you eliminate personal transactions from the business account, you will have an easier time categorizing and reconciling transactions and making sense of financial statements. This will ensure you don’t make any mistakes.

Besides, it can be difficult to sort through your personal transactions since you are likely to forget the nature of every transaction. This could result in several errors and you would be unable to get an accurate picture of your finances. Therefore, you have to keep both of your accounts separate. It is also important that you do the same for your credit cards.

2. Draw a Salary

Another bookkeeping tip that will make it a lot easier for you to manage everything is paying yourself a salary. Generally, owners of S corporations (S-corps) and C corporations (C-corps) tend to pay themselves a salary and include the entries in their payroll system. Even if you are a self-employed owner, it is a good idea to pay yourself a salary every month. It will ensure your consistent income and help you not under or overpay yourself.

When you pay yourself a salary, you get to reinforce the notion that you and your business are separate. It also reduces the possibility of withdrawing money when the business needs it the most. Besides, you don’t want to rely on your business bank account to pay your personal expenses. Drawing a salary on a monthly basis will prevent undue problems from occurring. It is worth keeping in mind that it is a lot easier to record a salary than to account for personal transactions.

3. Get Reimbursed for Business Expenses

If you pay for business expenses out of your personal bank account, you should reimburse yourself. No matter how much effort you put into running your business, there will be times when you will need to pay for expenses out of your pocket. Although it is perfectly fine for you to help your business out in difficult times, it is crucial that you pay yourself back. After all, your personal funds need to remain protected.

The fact is that all business expenses should be paid by the business bank account. All you have to do to reimburse yourself is write a check to yourself and deposit it in your personal account. It will ensure that you have sufficient personal funds for other transactions. Keep in mind that this check should be separate from the monthly salary and be accounted for in your bookkeeping process under the appropriate business expenditure category.

The process of reimbursing yourself for expenses must be the same as the one adopted by your workers. You will just need to list the expenses and their purpose on the spreadsheet. Make sure to include the receipts as well. Although it might seem like a hassle to write a check to yourself, it will simplify business bookkeeping and ensure that all your data is accurate.

4. Monitor Business Mileage

In addition to the above, you also have to keep track of business mileage so you can reimburse yourself. You just need to determine a standard rate for each mile driven. Then, you should be able to calculate the total value of the miles driven and write yourself a check. Keep an eye on the dates and miles driven. You will also have to ensure that the purpose of the trip was business and not personal. The process of reimbursement is rather straightforward.

Business owners can even rely on software to track their mileage automatically using their smartphones. It makes the entire process a lot easier. Besides, you are unlikely to want to perform the entries manually. There are plenty of mileage tracker apps that you can use to get the job done. In fact, you can easily categorize your trips and even plan routes as well as maintain timesheets.

Now, you must avoid paying for personal trips, as it is not the responsibility of your business to pay for your personal expenses. This is why you have to monitor every trip you take. Since mileage expenses are tax deductible, you have to record them.

5. Keep All Your Receipts

If there is one bookkeeping tip that you should never forget, it is to keep all your receipts. You don’t want to lose them as it would make it difficult for you to keep accurate financial records or to claim expenses properly. The IRS has made it clear that you need to provide receipts for each tax deduction. In the past, it was common for businesses to have a file folder for every vendor and keep receipts in it. Today, you can simply scan the receipts and upload them on the bookkeeping software. It will make things a lot easier for you and streamline your accounting process.

6. Send Invoices Within 2 Days

An important bookkeeping tip that you need to follow is sending invoices within 48 hours. Once your product or service has been delivered, it is crucial that you create an invoice and send it to the intended customer. Consumers are more likely to clear their dues when they are sent an invoice quickly. As the transaction will be fresh in their minds, they would have no trouble making the payment.

Electronic invoicing has made things both easier and quicker. You should be able to send an invoice within 48 hours when you use an accounting software application. It will also allow you to keep track of your accounts receivable and improve your business cash flow. The fact is that bookkeeping would be incomplete without invoicing.

7. Send Payment Reminders

Lastly, you also have to send a payment reminder to each customer who has failed to clear their dues. It is the only way you can keep your business running. Otherwise, you would struggle to improve your cash flow. When a customer misses a deadline, you need to reach out to them and let them know that their invoice is due. In addition to sending a payment reminder by email, you should also give them a call for swift results. Don’t wait too long to let your customers know that they have missed clearing their dues as it will encourage them to avoid making a payment.

However, you must make sure that you are not too aggressive, as this will only make matters worse for you. Also, you might want to send collection letters for collecting payment. A collection letter can serve as evidence in case you decide to take legal action against someone.

8. Automate Where You Can

Skip doing everything manually. Save time and keep better records by using automated functions on your cloud-based bookkeeping software. Manage your business banking online and sync these two so that business transactions and purchases automatically update from your bank to your bookkeeping software.

9. Do a Quarterly Review

When you reach the end of each quarter, take a close look at your accounting and bookkeeping reports and records. Look for patterns, year-over-year changes, seasons of rising or declining revenue and sales, unpaid invoices and much more. Stepping back and looking at long-term patterns as well as looking closely for previously missed issues can help you make better financial decisions and grow your business more effectively.

Conclusion

These tips should help you improve your bookkeeping practices. There is much more to learn about financial reports, income statements, expense tracking, business credit cards, business accounting software and other accounting tools, keeping accurate records, managing operating expenses and much more. Yet, as a busy business owner, these practices will help you refine your bookkeeping strategy and improve your financial situation.

Although you can tackle bookkeeping on your own, it is often a great idea to outsource the work so that you can focus on running the show. You don’t want to get too caught up and lose track of the things that matter most. Having an expert take on the work would ensure that everything remains in order and you can go on leading your organization.

Sound Accounts brings relief, productivity, organization, and peace of mind to companies of all sizes, with individually tailored bookkeeping services and sound financial advice. Connect with us today to learn more about the difference Sound Accounts can make for your business.

Also, don’t miss out on 6 months of QuickBooks free, for qualified new customers, plus other great bonuses. Contact us today.

To learn more about business bookkeeping, check out our frequently asked questions below.

FAQ

What are 4 important activities in bookkeeping?

When it comes to bookkeeping, you need to analyze financial transactions, write journal entries, post entries, and adjust entries at the end of the period to ensure that everything is in order. There are many more key bookkeeping activities but these are always important.

How should a small business organize their bookkeeping?

Small businesses often benefit from outsourcing their bookkeeping process to ensure they benefit from the best service. In-house bookkeepers are an excellent resource and a great choice but with outsourcing you get all the benefits without having to pay a full salary, benefits, set up a dedicated office, purchase new technology, and more.

Can I manage my own bookkeeping for my business?

Even though you can take on the bookkeeping process on your own, you should let a professional handle the work for you. There are many intricacies within bookkeeping practices. It is easy to make mistakes and get fined by the IRS. Also, bookkeeping takes a lot of time and will pull you away from other management activities essential to your organization’s growth.

October 5, 2022
7 Basic Principles of Financial Management

When it comes to running a business or even a nonprofit organization, you need to understand the importance of financial management. After all, if your finances are not in order, your financial health and long-term viability as an organization will suffer. Whether it’s paying off credit cards or maintaining sufficient cash at the end of the month, you must have enough money to make payments and meet your responsibilities.

Successful organizations know that controlling costs and managing risk comes down to how well they manage their finances and financial policies. If you want to make sure that you take the right actions to help your organization grow, you have to have a clear financial plan and financial goals. The following principles of financial management will enable your business or organization to thrive and move forward with purpose.

1. Organize Your Finances

One of the most basic principles of financial management that you need to master is to get your finances organized. Only when your finances are in order, free of clutter and distractions, can you expect to proceed with procurement and the acquisition of supplies. In fact, it is necessary for obtaining a lease agreement and other types of agreements and to prepare for an audit.

By organizing finances, both your personal and professional accounts, you establish the foundation for creating wealth. This is why you will have to track everything, including car loans, mortgages, brokerage accounts, personal loans, bank accounts, credit cards, and retirement accounts. You should be able to use budgeting software to track these accounts and make payments on time so you can avoid late penalties. Besides, the federal government advises businesses to account for everything, even indirect costs. This allows you to accurately prove how much you earn from your business.

If you don’t have much experience organizing finances, you should educate yourself with a range of resources along with taking basic or in-depth courses on the subject to achieve your ultimate goal. Most of the tools available today provide access to insights and research that can help you move in the right direction. You should read financial blogs, books, and periodicals to stay updated and to continuously educate yourself. The last thing you want is to make mistakes you could have avoided.

2. Spend Less than You Make

When you start a business, it’s pretty easy to go overboard. Similarly, individuals need to spend less than they earn in order to control their debt-to-income ratio. Even if you want to spend more on your investments, you still need to think things through. Otherwise, you could overspend and force yourself to borrow additional funds through a loan or other means.

Once again, you should be able to use financial software to keep track of spending and budgeting. It will allow you to meet your long-term goals. By learning how to monitor finances and understanding where most of your money is going, you’ll be able to establish control over your finances. It is one of the secrets to strong business performance. Luckily, you don’t need an accounting degree to know when you are spending more than you are earning. When you overcome debt or avoid it altogether, you decrease your liabilities and increase your ability to expand.

In addition to controlling your spending, you have to limit debt to income-producing assets. When you have car loans and credit cards to pay off, you will have less money for your goals. You need to understand that only a few car models don’t depreciate to zero. On top of this, you have to pay for repairs and high-interest rates. Therefore, you should consider whether you even need to purchase things that are not an absolute must. If you want to take on debt, it should only be for financing items that actually retain their value with time, such as education, real estate, business equipment and technology, and talent.

3. Make Your Money Work

If there is one basic principle of financial management that you need to master, it is to make your money work for you. This is where the concept of the time value of money comes into place. If you invest today, you can expect a greater return if you plan with wisdom and the right research. Whether you want to invest in entities, stocks, or a savings plan, the earlier you begin, the better.

Consider diversification to ensure that you don’t expose your portfolio to excessive risk. Qualified financial planners are good for this. Make sure you regularly invest your money so that you get something in return and take prompt corrective actions to shift your investments toward more advantageous avenues when current results aren’t meeting your strategic goals.

Since money loses value over time because of inflation, you cannot simply wait around and let assets collect dust. Instead, consider new places to invest, real estate opportunities, and remote contract work. Offer outside consultation services to businesses or non-profit organizations. Develop new products and services to introduce to the market. Invest in a franchise or another company, and consider expanding current systems to increase profit over time.

Remember, when speaking of diversification, you should know that it isn’t only reserved for investment. You should find ways to get more out of your income. We all have talent and special skills that can provide money-making opportunities. Earning some extra income can help you with financial management and enable you to lead a better life.

4. Understand Risk

Everything comes with risk in life. Generally, the more risky something is the higher the return should be. It is known as the risk-return trade-off. Investing in bonds and stocks comes with a higher rate of return because there is more risk involved, along with the possibility of you losing your principal.

On the other hand, investments like money market accounts and certificates of deposit come with a lower rate of return, but they hold a lower level of risk. However, you still need to understand that no investment comes with zero risk. As long as you manage your portfolio well, don’t place all your eggs in the same basket, and make the most of wise financial advice from qualified investors and professionals, you should be good to go.

5. Maximize Employment Benefits

If you are working a regular job, it is a good idea to cash in on employment benefits. You should definitely get medical and dental insurance, consider flexible spending accounts, and take a serious look at a 401(k) plan. The reason why you need to set money aside for employee benefits is that they are tax deductible and a great way to protect you and your family. This means that you actually end up saving money when you get them, while providing for your family’s health and wellness. It is crucial that you invest in your future. It will ensure you improve your overall financial and personal well-being.

6. Pay Attention to Taxes

The next basic principle of financial management that you need to know about is paying attention to taxes. Managing taxes accurately allows you to avoid penalties and to benefit from tax credits, while applying adequate safeguards to your compliance practices. You might not realize it now, but taxes can eat away at your earnings.

If you fail to account for your tax burden, the same way individuals sometimes don’t pay enough attention to their capital expenditures or employment costs, you could easily lose a huge share of your income. You should look into taxable investments and organize your year-end tax filings to ensure there are no mistakes, no delays, and no missed opportunities for deductions and savings. Be sure to evaluate all your tax implications and possibilities. This will allow you to maximize your take-home amount personally and in the professional sphere, put your company’s revenue to work more effectively.

7. Plan for the Unexpected

Nobody knows what the future holds. Still, you can’t just wait around for an unforeseen emergency to pop up and hope to deal with it when it arises. What you need to do is save enough money to ensure you have cash ready when something goes wrong. You might have to weather natural disasters, house repairs, car problems, catastrophic medical care, accidents, or extended unemployment. Therefore, you must prepare for uncertainty. Make sure to increase your savings during the good times to avoid a difficult situation later on.

When you have sufficient savings, the bumps ahead, while difficult personally, will not have such a dramatic effect on you financially. You have to be ready for unexpected financial exposure. Otherwise, your long-term goals are in danger of going unrealized. Besides, you have to look after the financial security of your family. Lastly, don’t neglect all necessary forms of insurance, such as short-term and long-term disability, medical coverage, home and auto, business, and umbrella insurances. Having a financial plan and a high standard for your financial health can help you escape hardship or even ruin.

Conclusion

Understanding the basic principles of financial management is key to a healthy, fulfilling life and to the success of any company. From organizing your finances to planning for the unexpected, each tip mentioned above will help you prepare for uncertainty and make more strategic decisions. Never neglect sound financial planning and advice. It is one area that all successful individuals and organizations have in common.

Sound Accounts helps individuals and business owners make the most of their finances with individually tailored bookkeeping service plans. Contact us today to get started and see the difference an experienced bookkeeper can make for you and your business.

To learn more about financial management, check out our frequently asked questions and answers below.

FAQ

What is the most important principle of financial management?

There are several key principles to good financial management. One that should always remain a priority is to organize your finances. Good organization helps you stay in command of your money and future. Additionally, creating and following a budget will help you meet your financial goals.

What are financial principles?

Financial principles are guidelines that people and businesses can follow to avoid financial hardship and continually build and expand.

Why Are Financial Principles Important?

A few primary reasons financial principles are crucial are that they provide you with a framework you can follow to maximize your earnings and minimize expenses. Sound financial principles enable us to move ahead with a plan instead of making uninformed and reactionary decisions that don’t get us ahead.

September 28, 2022
How to Manage Small Business Finances

When it comes to running a small business, it is extremely important that you have a strong understanding of your financial statements. In fact, they can be used as a tool for better managing your business finances, especially cash flow, and for making financial projections. To help you manage your small business finances more effectively and to gain a wider view of financial management, your financial goals, and your overall financial health, we have prepared this informative post. Let’s take a look right now.

Why Do I Need To Understand Cash Flow?

The ability of a company to generate positive cash flow determines its success and long-term financial health. As a small business owner, you need to have a grip on your cash flow if you want to avoid failure. It is one of the most fundamental things you need to master. Budgeting to ensure stable cash flow is a primary objective that every entrepreneur should focus on. Besides, research reveals that most of the businesses that fail often do so because of poor cash flow management. Therefore, you have to turn to financial statements to improve how you manage your small business finances.

Why Do I Need To Prepare Financial Statements?

Before we take a look at how to manage small business finances, you should know why you require financial statements in the first place. The fact is that financial statements provide a holistic view of your business revenue, business income, and business expenses, among many other aspects. You can rely on them to help you better manage funds and improve your overall profitability. If you are struggling to run your business and finding it difficult to achieve certain benchmarks in your business plan, you should start by looking into your financial statements. Here are some of the reasons why you have to make this a priority.

1. Allows You to Be on Top of Cash Flow

One of the main reasons you have to prepare financial statements is because they make sure that you remain on top of business finances. This level of continual information allows you to remain in control of business operations. Only when you have an idea about where you stand can you move towards your business goals. Hence, you need financial statements to help you avoid cash flow mistakes and late payments, to make sure you factor in all business transactions, marketing costs, employment and more, and to ensure that you always have enough cash on hand.

2. Improves Understanding of Your Business

Accounting is the language of business and one of the primary keys in business planning. It allows you to plan for unforeseen costs, gauge your equity or debt financing, make your monthly payments, build business savings and manage business checking, utilize business loans and business credit cards (business debt) to grow, protect yourself with business insurance, invest in the right people, and make clear, level-headed financial decisions.

The only way that you can truly understand your company, especially its financial strengths, is by going through your financial statements. They provide insight into your financial position. You get to review everything you own and owe as well as how much money you are making. This enables you to make the right decisions and steer your organization in the right direction.

3. Necessary for Filing Taxes and Applying for Loans

Whether you want to prepare taxes or get a loan, you need to have your business financial statements in hand. Otherwise, you will not know how much profit you made to correctly calculate your tax rate or burden. This will affect tax payments and compliance among other aspects of tax planning.

Similarly, no bank or lending institution will provide you with a business loan or bank loan or other forms of business funding if you are unable to provide them with your financial statements. However, these statements must show that your company is performing well in order to be granted a loan.

How Can I Use Financial Statements to Establish a Profitable Business?

Here’s how you can use each financial statement to achieve greater success as a business owner.

1. Balance Sheet

The balance sheet is easily one of the most important financial statements that a business needs to understand. It provides insight into your current financial situation. You can rely on it to see how your company is doing financially at a specific point in time.

It allows you to get an idea of what you own vs. what you owe. (debt vs assets). While it’s fine to take on loans to finance your venture (depending on payment terms), they should not be greater than your assets. You will have to keep an eye on your debts to ensure that you do not end up in an undesirable situation in either your business or your personal finances (personal accounts). Your personal accounts can affect your business finances if you aren’t careful.

2. Statement of Owner’s Equity

Another financial statement that can help you manage your business is the statement of owner’s equity. It helps you see how much income you are reinvesting or retaining. By seeing the changes in the equity over a specific period of time, you get to know which direction your company is heading so that you can make better decisions. Key data in this report will help you determine what level of reinvestment you want to commit to.

3. Income Statement

Also known as the profit-and-loss account, the income statement enables you to see how your company is doing in terms of profitability. This means that you can evaluate how much profit you are making and if you are even making a profit at all. The income statement covers a set time period, which is normally a year, and provides information about the costs incurred to offer your products or services to the public.

3. Cash Flow Statement

In the simplest of terms, the cash flow statement covers how much cash comes into your business and leaves. It is essential to find out how well your organization manages cash. Since you need cash to pay off debts, cover operating expenses and stay current during tax time, your cash flow statement should always be positive. On the other hand, if you have a negative cash flow statement, you need to be worried, since you’ll have to take on more debt and find new ways to increase the influx of cash.

How Can the 4 Financial Statements Be Used Together?

The income statement lets you know how much net income your business is bringing in, which makes its way to the owner’s equity.

The owner’s equity statement reveals whether you are in a positive or negative position. It allows you to find out whether you have a positive value for the retained earnings or not. If it is not the case, then you will have to find out how you can increase your retained earnings. It might require you to limit reinvesting.

As for the statement of cash flows, it provides an insight into what your cash position is instead of just looking at the value that appears on the balance sheet. So, you would be able to see where you are going wrong and how you can increase your cash flow and minimize losses.

The balance sheet offers a summarized view of your financial position at a specific moment in time.

How Can I Get Started?

Now, if you are wondering how you can get started with compiling these key business statements, you should consider the following tips.

1. Separate Personal and Business Finances

If you want each of the four financial statements to provide an accurate view of your financial standing, you will have to separate your personal and business finances. As we mentioned above, you need to understand that there are plenty of benefits to keeping both of these finances separate. It is one of the basic rules of running a business. Business bank accounts and business cash flow need to stay clear of personal accounts and personal finances.

2. Ensure Consistency

The secret to making the most of financial statements is consistency. You need to be consistent in order to evaluate how you are doing accurately. Studying your financial statements isn’t something you can do occasionally, only once a quarter, or simply during tax time. It is a habit you should get into weekly.

3. Consolidate the Data

Lastly, you need to consolidate your data if you want to make it work. Creating financial statements is a lot easier once you collect all your business cash flow data. For instance, you should connect your online account software with the point-of-sale credit card reader and small business account. This will ensure that you have all the information you need in one place. This will allow you to create the financial statements within minutes.

In Closing

Each of these financial statements needs to be prepared with great care and then thoroughly evaluated. You should make it a habit to review the statements to stay on top of your finances and avoid surprises. The greatest business owners in the world know their finances inside and out. It’s not something you can leave until later or hope for the best. Learn everything you can and get the professional help you need from an experienced bookkeeper or bookkeeping service provider.

Sound Accounts helps business owners succeed with superb bookkeeping solutions, tailored individually for each client. Connect with us today and discover the difference Sound Accounts can make for your business.

To learn more about small business finances, check out our frequently asked questions and answers below.

FAQ

How Do New Small Businesses Manage Finances?

In order for a small business to manage its finances, it needs to prepare and evaluate financial statements, which include the income statement, the balance sheet, the cash flow statement, and the statement of owner’s equity, among others.

Many small business owners choose to partner with a bookkeeper or bookkeeping service provider, You can also learn more by reading business blogs, books on business finances and taking classes online or in-person.

It’s good to keep an emergency fund for unexpected expenses, establish business checking, inquire about business loans, solidify your legal structure, check your personal credit rating and business credit score, invest in quality bookkeeping software, learn how to read and interpret financial reports, know your credit limit, and make financial projections and business decisions based on your bookkeeping and accounting knowledge.

What Is The Most Important Financial Statement For A Small Business?

The most important financial statement for a small business is the cash flow statement. The reason behind this is that most small businesses tend to struggle with managing operating expenses no matter what accounting methods they use or what type of business they run.

How Are Financial Statements Used In Small Businesses?

Financial statements are used by small businesses in a number of ways, such as for decision-making, seeking a loan, financial reporting, making business purchases, keeping business records, and improving cash flow.

September 21, 2022
What Can a Bookkeeping Service Provider Do for My Business?
Running a business is no easy task. There is a lot that you need to look after and countless business decisions to make every day. it can be an incredible responsibility. It’s important to understand that no matter how good you are, there is just so much that you can do on your own.

One area where business owners like you can benefit greatly from a seasoned expert is in their bookkeeping and accounting. It is quite common for businesses to outsource their accounts to professional bookkeepers through a bookkeeping service. Only bookkeepers and accountants know how to manage payroll, accounts, finance, and taxes with ease and absolute accuracy. This is why it may be in your best interest to hire a bookkeeping service. Here is what a bookkeeping service provider can do for your business.

1. Create a System of Internal Controls

When you hire a bookkeeping service provider, you get to ensure that you have a dedicated professional who can create a system of internal controls for your organization. As only one highly qualified individual or dedicated bookkeeping team would be responsible for maintaining the books instead of several random employees with varying skills, the integrity of your financial information would be far safer and better organized. Bookkeeping firms offer a high level of accuracy and security for your company’s finances.

Once a system of internal controls is established, the risk of human error can be reduced significantly. Therefore, you would be able to rest assured, knowing that there would be a system of checks and balances in place to maintain the authenticity of the records. On the other hand, if you fail to implement such a system, your business will end up going bankrupt and it would be too late for you to do something about it. Besides, every successful business knows that internal controls establish a solid foundation for growth.

2. Ensure Your Financial Records Are Accurate and Up-To-Date

With a professional bookkeeping service by your side, you will be able to make sure that your records and accounts are up-to-date. There is nothing more frustrating than not knowing whether your accounts are up to date. By hiring a bookkeeping service provider, you’ll benefit from accurate and timely account information which keeps your business financials in top order. This means you have exactly the information you need most to make sound business decisions.

Also, since everything would be handled on a cloud-based QuickBooks-centric system, you would be able to access the latest information from your business finances whenever you want and from wherever you want.

Entities today often need to use cloud and other virtual technologies to improve collaboration between their employees. This helps integrate business functions and ensures that only authorized users can access necessary data and documents. Bookkeeping and accounting service providers use technologies that business owners can access and collaborate with. This means your workflow and theirs are in sync. On top of this, your bookkeeper will handle the month-end entries and other tasks so that updating everything is off your shoulders and always timely.

3. Provide Peace of Mind

One of the main reasons why businesses of all sizes outsource their bookkeeping or accounts department is because it provides much-needed peace of mind. Forget about experiencing any accounts-related issues when you hire someone who has significant expertise. Your service provider offers all their services within a secure environment, protected by encryption, and multiple layers of additional security measures.

With information technology taking over, you need to have an expert handling sensitive financial records and data. Otherwise, you will place your business at risk. The bookkeeper commits to protecting your financial data so you can focus on running your business.

4. Pay Your Employees on Time

In addition to the above, a bookkeeping service provider will make sure that all of your employees are paid accurately and on time. Whether you pay your workers on a monthly, weekly, or daily basis, you’ll be glad to know that your bookkeeper will be on top of every transaction.

Payroll processing should always be handled by a professional. This ensures legal compliance and empoyee loyalty. In order to maintain your productivity levels and encourage employees to work hard, you have to pay them on time and keep their records accurately. This is where a bookkeeping service provider will come in handy. There’s little to no room for human error when it comes to navigating withholdings, taxes, and other details.

The service provider is likely to offer payroll processing. This would mean that all paychecks, tax forms and payments, and even timesheet management, are taken care of. You will not need to stress, as everything would be taken care of.

5. Reconcile Bank Accounts

Reconciling financial accounts is an area where most business owners could use help. Only when you get account reconciliation right, can you expect transactions to match the details of your bank statements.

Since accounts will be regularly reconciled, you will not need to pay overdraft fees or additional charges. Also, there would be no incorrectly recorded transactions holding you down and confusing your data later on. Even though accounting software has made reconciliation easier, a human touch ensures that every transaction and every financial detail is precise.

6. Manage Bank Feeds

A bookkeeper can manage all transactions brought in from the bank feed. This ensures that each transaction is organized. So, no matter what kind of transaction it is, from equipment to travel, and from office supplies to bonuses, every transaction will be in its right place, categorized and accounted for with no uncertainty.

As for transactions not included in your bank feed, they would need to be entered manually into the system. These include handwritten checks and cash payments. Moreover, there would be a need to match deposits with customer payments to manage accounts. This, too, could be handled by your trusted bookkeeping service provider, depending on the service level you choose.

7. Handle Your Taxes

Outsourcing your bookkeeping needs ensures an expert always handles your taxes. If you have a certified public accountant that files your taxes, you are going to need a bookkeeper who will serve as their first point of contact.

Since bookkeepers have a more intimate knowledge of the books, you can rely on them to work with your tax preparer and have your small business taxes on point and filed on time. Your bookkeeper will also make sure that you are able to claim refunds, make payments on time, and apply any adjustments resulting from changes in your business’s tax status, business designation, or employee status.

8. Prepare Financial Statements

A bookkeeper will prepare all major financial reports for your business, which include the cash flow statement, balance sheet, the profit-and-loss statement, and many more. Having access to updated financial statements is necessary for making important decisions and better investments, along with monitoring costs. It ensures that you have a clear picture of your operating expenses and your bottom line.

The balance sheet will show the balance of assets and liabilities, whereas the cash flow statement will let you know whether you have more inflows or outflows so that you can make necessary decisions for improving your cash flow situation.

9. Make Useful Technology Recommendations

The world of bookkeeping and finance has also seen many technological developments over the years. As you are unlikely to know about the latest solutions, you need an expert to help guide you so that you are able to harness the full potential of your organization through technological integration. Your bookkeeping service provider will also be able to suggest practical digital apps specific to your industry that will increase productivity and efficiency.

10. Fraud Prevention

Lastly, you need to hire a bookkeeping service provider for your business as it helps with fraud prevention. If you only employ an in-house accounting team, your organization may be more vulnerable to fraud. Outside bookkeeping teams stake their reputations and continued success on transparency, honesty, and accuracy. They are known for their high level of professional integrity.

In Closing

A bookkeeper can help your business succeed in a number of ways. They have the skills needed to keep your finances organized, keep you compliant, and help you make informed decisions. At the end of the day, you could use all the help that you can get to continue your upward momentum.

Sound Accounts helps business owners succeed with industry-leading bookkeeping support and sound financial advice. Connect with us today to learn more about the difference Sound Accounts can make in your business.

To learn more about bookkeeping service providers, check out our frequently asked questions and answers below.

FAQ

What specific services does a bookkeeper provide to a business?

When you hire a bookkeeper, you can expect to receive various services, including payroll processing, tax preparation, and filing, maintaining accounts, bank reconciliation, and the preparation of financial statements. However, you should consult with your bookkeeper to get an idea about the additional types of services they provide.

What are the benefits of hiring a bookkeeping service provider?

There are many benefits of hiring a bookkeeping service provider, as mentioned below.

Peace of mind
- Tax filing on time
- Accurate financial accounts
- Payments to employees on time
- Preparation of financial statements
- Use the latest technology for managing accounts
- Provides strategic information to help you make better business decisions
Why shouldn’t I just handle all my bookkeeping needs myself?

Some business owners attempt to do this. The rare few pull it off, at least for a short time, as long as they have a simple business model and only have a few employees. For most business owners, partnering with a bookkeeper allows them to focus on the core of their business. Bookkeeping service providers keep financial information organized, ensure accurate payroll and taxes, and serve as another partner in your continued success.

Attempting to juggle the responsibility of bookkeeping while trying to manage everything else in your business and life is usually too much to handle. It can lead to missed payments, lost data, human error, and even violations of compliance and regulations. Your bookkeeper will make sure you never have to worry about these kinds of errors.
September 14, 2022
How to Fund Your Small Business Startup or Expansion: Several Options

One of the most important decisions that businesses need to make is how to get funding to fulfill their business idea and business plan. After all, you need money to purchase new equipment, venture into a different market, and launch a new product. No matter which industry you might operate in, you will need financing at one point or another. This is why it is crucial that entrepreneurs know what their options are. To help point business owners in the right direction, we have prepared the ultimate post. Here is everything you need to know.

1. Business Credit Cards

When it comes to small business or startup funding, business credit cards are a great option. The reason why you might want to consider getting a credit card for your business is that it is relatively easy to get one. The bank does not care how long you have been in business, as long as you meet the minimum eligibility requirements and eligibility criteria. Therefore, you should be able to gain access to money if you have a decent credit score and are making a profit. Although you might consider credit cards to be a great option for making payments for purchases, they provide a type of financing called a line of credit.

According to a survey conducted by the Federal Reserve Small Business Credit, it was found that around 53 percent of small businesses rely on credit cards for funding operations. This is why you should consider the option. Besides, a business credit card could be the perfect alternative to a business loan, especially if you only require minimal funding. Moreover, getting a credit card could help you establish business credit history and separate your business and personal finances. You may also need a personal guarantee to qualify.

2. SBA Loans

Another way to fund your small business startup or expansion is by seeking an SBA (Small Business Administration) loan. Keep in mind that individual lenders who have been approved by the US Small Business Administration can only offer such loans. The reason why they are worth considering is that they come with lower interest rates. You would only need to pay a higher interest rate if you get a disaster loan. With ten different types of programs available, business owners have several choices for financial assistance. The (7a) program is widely popular as it can provide up to $5 million.

With most of the SBA loans being taken up by startups, you should be able to get approved. However, the process is neither easy nor quick. If you don’t have time to spare, you could opt for the SBA Express loan program, which can provide up to $500,000. Make sure that you meet the requirements if you plan on applying. On top of this, you are going to need a business plan to cover monthly payments for most loan programs. The fact is that the US Small Business Administration prefers business owners who have some experience and are willing to agree to favorable terms.

3. Crowdfunding

If you want to fund your business, you need to consider all your options. A great way to finance your startup or expansion is by using crowdfunding platforms. They put entrepreneurs with a vision at the forefront and offer a quick route to raising money. Startups have three main types of crowdfunding options, which include investment (We Funder), debt (Kiva), and rewards (Indiegogo and Kickstarter).

Business owners have to share their objectives and goals to attract a large group of people to invest in their venture. Keep in mind that marketing is necessary for a successful campaign. However, the final reward will be worth it once you get the necessary funding.

4. SBA Microloans

In addition to the above, you also have the option to seek an SBA microloan. Only approved intermediaries, such as CDFIs (Community Development Financial Institutions) can offer SBA microloans. However, you should know that only a maximum of $50,000 can be granted, while the average loan tends to be around $14,000. Since the microloans are term loans, you will have up to 72 months to pay them off. You should be able to use the funds for purchasing inventory or working capital.

5. Additional Microloans

There are other microloans available besides SBA microloans. Small businesses should consider the following options:

Local Microlenders: One of the best ways to get funding is by opting for a local microlender. There are microlenders in just about every community throughout the US. However, these small non-profit organizations do not advertise their offerings to the public.

Kiva: It is a trust-driven and community-based platform that entrepreneurs can rely on to crowdfund their business from philanthropists. You can borrow up to $15,000 at a time. A great thing about these loans is that they provide support to struggling businesses and have an APR of 0%. All you have to do is prove to the network of lenders that you have character and are committed to helping your community thrive economically.

Accion: CDFI partners of Accion offer loans worth $5,000 to $100,000. You will appreciate the fact that credit requirements are on the flexible side. Besides this, you can even seek assistance with your application.

6. Bank Loans

Even though you might be thinking about heading to a credit union or bank before considering any other option, you need to understand that startup businesses have a difficult time getting a bank loan. This is because banks have strict lending standards which small businesses sometimes cannot meet. In order for a bank to provide a loan to a startup, it would have to ensure that it is not overly risky. It would have to require you to provide a personal guarantee, a down payment, excellent credit, and a strong personal qualification or experience in the industry.

7. Equipment Financing

If you want to buy machines and equipment, you should be able to get an equipment loan. It is the same as any other conventional loan, since you would have to pay an amount every month for a specific period of time.

The proceeds would be used for funding the purchase of the machinery or equipment. As the equipment would serve as collateral, the requirements are less strict which means that you should be able to get a loan without much effort. Apart from this, you could opt for equipment leasing. All types of assets that you use for your business can be leased, such as furniture, kitchen equipment, and computers.

8. Line of Credit

Unlike a business loan that provides a lump sum of cash up front, a business line of credit provides a specific amount of credit over a period of time. You just have to keep paying back what you owe if you want to keep using this funding option. It is possible to get a long-term line of credit.

9. Short-Term Financing

For those of you who simply do not qualify for traditional funding, it might be best to opt for a short-term loan. They have a short repayment period of anywhere from a few months to a few years. However, you will have to be prepared to pay higher interest rates.

10. Personal Funding

Have friends or family members who can chip in? You might want to consider seeking personal funding. It is one of the ways in which small business owners fund their operations. However, personal funds tend to be a huge gamble, especially if you plan on using up all your savings. In case you use personal funds, it is important that you move towards establishing business credit to avoid serious implications. It would also enable you to access more capital. You should be able to get the business up and running without having to compromise your personal assets or relations.

If you cannot get a business credit card, you can always use your personal credit card as long as you have a high limit. It would allow you to make those initial purchases. However, you have to keep in mind that using a personal credit card for your business expenses can hurt your credit score. Using your savings can be even riskier. You might want to borrow from home equity. Otherwise, you have the option to withdraw money from your retirement plan.

Conclusion

Running a business is tough. As an entrepreneur, you need access to funding. As there are different options available, it is important that you weigh your options carefully. Discuss your choices with business partners, financial planners, and choose those that align with your plans.

Sound accounts helps business owners succeed with top-notch bookkeeping services and trusted advice. Connect with us today to learn more.

FAQ

How do I fund my business expansion or startup?

In order to fund your business expansion, you should consider taking out a bank loan from a traditional bank or credit union and using your business credit card, along with applying for federal grants and linking with other investment options like angel investors, equity investment partners, venture capitalists, and individual investors. You can also leverage your real estate and take advantage of other funding opportunities from personal investors and other private lenders.

What are the most common ways to fund a small business?

The most common ways to fund a small business is through personal funding and business loans.

What can I do if I don’t have good credit?

You can borrow against your home equity, partner with friends or family, find private equity lenders willing to lend to you, seek grants, and more.

September 7, 2022
Breakthrough Small Business Ideas: 2022 Edition

When it comes to launching a new business, there are many ideas that you can try out. You have a range of options when it comes to building a lucrative business. This has resulted in many entrepreneurs succeeding. Many business owners are able to meet consumer demands simply by using the internet. With the right products or solutions, there is no limit to what you can achieve.

However, with every business venture, there is the possibility of either success or failure. Successful entrepreneurs and breakthrough innovators understand that long-term success is more than just a good business idea. It takes discipline, smart money management, good leadership, creativity, adaptability, funding, clear goals and much more.

But today we want to start off by sparking your interest and imagination with a handful of breakthrough small business ideas. Once you’ve narrowed down your focus, you can begin to turn your attention to the finer details of building a business. Let’s dive in.

1. Create an Online T-Shirt Business

One of the best small business ideas that have become incredibly popular in 2022 is an online T-shirt store. You can use a platform such as Shopify or Printful to get going. With just a bit of imagination, you will be able to launch your brand. Besides selling T-shirts, you can offer additional items like sweatshirts, shorts, prints, mugs, and posters.

2. Dropshipping Business

Breakthrough technologies have made it possible for dropshipping businesses to flourish. It offers the easiest option for launching an ecommerce enterprise. The best thing about this route is that it doesn’t require you to buy any products or keep a costly supply of inventory on hand.

There are even dropshipping apps that you can use to sell items. Avoiding the expense of spending money on manufacturing or warehousing, you will be able to focus on getting your marketing and branding just right. Innovators are selling all types of things including women’s clothing, jewelry, camping gear, collectables, educational materials, office supplies, toys and much more.

3. SEO Business Expert

Search engine optimization (SEO) has become incredibly popular in recent times. If you are tech-savvy and have an understanding of the latest technologies, you can provide advice and serve as a business expert. It’s about time that you put your skills to good use. Some of the ways through which you can earn as an SEO expert include content creation, link building, and website optimization.

4. Offer Online Courses

Have a passion for teaching? You can turn your hobby into a successful business by selling online courses. You will need to create a strong personal brand in order to convince people to sign up. Even if you don’t feel like making a course, you always have the option to teach online. There is a demand for just about every subject, from English and foreign languages, to tech subjects, art and more.

5. Video Producer and Online Influencer

For those of you with a strong creative side, becoming a video producer is a great option. As YouTube is one of the biggest websites in the world, you can start by uploading content and promoting it. It shouldn’t take long before you start earning money if you stick to content that folks are looking for.

Make sure that you create interesting videos with timely subject matter, genuine conversation, humor, and honesty. You will need to start by learning how to record videos and edit them. With plenty of challenges along the way, there’s a lot to be excited about.

6. Graphic Design

If you’re more into graphics and visual content, you can start providing graphic design services. There’s always a demand for graphic designers. It takes some training and once you get going you will need to differentiate and set yourself apart from the pack to get noticed.

You can take in-person or online courses from universities, community colleges, and online educational sources like Udemy, Coursera, and Skillshare, or even contract with a personal teacher or mentor.

7. Website Developer

Consider becoming a website developer. It takes graphic design to the next level and combines it with SEO skills, marketing tools, professional writing, programming and more. Businesses constantly need to improve and upgrade their websites and landing pages, so you would have no trouble growing your company. Besides, you will get to work on all types of websites and business owners which will give you a wide range of contacts and experience. Although it can be rather challenging, you are bound to enjoy your work.

8. App Development

Another possibly lucrative small business idea is to provide app development services. Since every company wants to have an app of its own, the demand for this kind of service is big plus.

If you’re a programmer, software developer or have skills in these areas, consider combining some creative ideas with your skills to make some useful and memorable apps.

9. Theme Designer

A breakthrough small business idea that you need to consider is becoming a theme designer. Similar to a website developer, you would get to work on designing various themes or templates for websites. It can be fun to come up with new website themes for companies and individuals to use.

It will allow you to flex both your creativity and your technical muscle and establish you as a go-to creative in your field that companies can look to for solutions.

10. Translator

Do you have a strong command of two or more languages? Then, you can provide translation services in various capacities. It is a great alternative to teaching. As a translator, you can work with corporations, government agencies, diplomats, the military, non-profits and others.

Your job can involve translating websites, print materials and recorded assets and collateral to ensure that each business is able to enter a different market. You can also work as a translator in-person during meetings and negotiations. This small business idea requires a minimal investment once you’ve become proficient in additional languages. No matter the condition of the economy, there will always be a demand for translation services.

11. Social Media Management

Most businesses require a social media presence in order to thrive. Since it can be time-consuming, most companies prefer to outsource their social media management work. This is why you can expect to find plenty of work once you start providing services and proving you know what you’re doing.

Make sure to keep up with the latest trends in order to succeed. You can offer different packages to clients based on the business type, market, and level of commitment.

12. Remote Customer Service Agent

Prefer helping others with problems they might have? Starting a call center will allow you to work as a remote customer service agent. The job would involve responding to queries and ensuring that you resolve every person’s issue. You will communicate with people via email, chat, phone, and other ways.

Customer service agents are tremendous assets to all companies and there remains a consistent need for experienced and capable representatives in this field.

13. Virtual Assistant

Companies today sometimes need the help of a virtual assistant to operate. You can make good money by providing the services of a virtual assistant to a number of companies. The job would involve writing content, answering emails, scheduling, managing resources, hosting meetings, and other tasks. You might even need to host interviews, perform data entry, conduct research, and other activities.

14. Remote Sales Team

If you have superior communication skills, you also have the option to employ a remote sales team and make money from each company you contract with. With most companies that adopt a lean approach, you can expect to find clients around every corner. As long as you maintain a high standard and strong sales figures, you will have clients.

You’ll need to excel in communication of all kinds, personal organization and self-discipline, strong leadership and training standards, and consistent follow-up with your team.

15. Affiliate Marketing

Take advantage of your online presence by leveraging affiliate marketing to increase your income. Affiliate marketing involves promoting a product or service that another company provides. It involves the use of blogging, social media, advertising, and other methods to convince customers to purchase things from a specific company. Every time your user purchases the product using one of your links, you will get to earn money.

16. Lead Generation Service Provider

Since increasing conversion rates is something that most businesses are interested in, you can become a lead generation service provider. What you will have to do is focus on lead generation activities. It would allow you to reach out to strangers and convince them to make a purchase from a specific company.

You will use digital strategies, social media, customer service, along with more traditional strategies like mail marketing, events and more to capitalize on every potential customer.

17. Handmade Goods Shop

If you already make handmade goods, you can sell them on a platform like Etsy or Amazon. It allows people who are interested in DIY to earn money doing what they love. Therefore, it is a viable business option to consider.

You can make and sell just about anything, fine woodworking products like furniture, crafts, clothing, toys, art and much more.

18. Start Baking

Since there is always a demand for food, you can start baking and generate revenue. You could offer all types of baked goods, such as bagels, macaroons, cakes, and croissants. A great thing about the online world is that you can even learn new recipes online and sell them to customers.

You can contract with coffee shops, restaurants, bars, and other businesses to carry your products, along with selling at local grocery stores and farmer’s markets and even online.

19. Organic Beauty Shop

As people become more conscious about how they look and about their well-being, the market for beauty products continues to grow. To enter this competitive market, you will need to create unique beauty products that connect with a wide audience.

You can use the internet, video marketing, in-person events, farmer’s markets, fashion shows, and much more, to promote your brand.

In Closing

Creating a thriving business takes a lot of time, work, creativity, capital, and help. You can build your skills and assets over time. However, initially, you need a great idea for what kind of business you want to take on. Consider our suggestions and others you may have come across. Find collaborators who can help you realize your vision and when things get difficult, don’t give up, simply adapt, learn more, and innovate.

Sound Accounts helps business owners increase their productivity and find greater success with superb bookkeeping support. Connect with us today to learn more about how Sound Accounts can help you get the most from your assets.

To learn more about small business ventures, check out our frequently asked questions and answers below.

FAQ

What is one of the most profitable business ideaz in 2022?

Business consulting has become one of the most profitable business ideas in 2022. Combining a range of skills like management, leadership, mentorship, tech skills, financial planning, communications, analysis, negotiation and strategy, this career allows you to market to and help a wide variety of clients.

What Can I Sell In 2022?

The choices are virtually limitless: T-shirts, cookies, website themes, toys, vacation packages, wellness products, advice, training courses, cleaning products, beauty aids, antiques and much more.

What Industry Will Boom In 2022?

The IT industry will experience a significant jump in 2022. As more of us are doing business online, working remotely, and communicating digitally, the need for IT support continues to rise exponentially.

August 24, 2022
Bookkeeping Strategies to Improve Business Performance
Financial professionals are under significant pressure to work faster and deal with more complex data while ensuring they keep costs at a minimal. They don’t just spend all their time gathering and reconciling data, there is a lot more that accountants can do to improve the financial performance of a business.

Accounting is a process that records transactions and maintains a chart of accounts. However, it can help with strategy and management. Business owners of both small and large enterprises need to focus on improving their accounting processes to ensure their current ratios and cash flow are favorable.

It is vital that business owners utilize quality accounting standards to ensure they’re making the most of their resources. Every successful business owner knows that accounting professionals play a huge role when it comes to improving business performance. So, if you’re looking for bookkeeping strategies that managing accountants and auditors suggest, you have come to the right place. Here’s everything you need to know.

1. Centralize and Streamline General Accounting Processes

One of the bookkeeping strategies that you and your employees need to consider implementing is centralizing and streamlining the general accounting processes. The fact is that the way an organization is structured to deliver accounting processes and accounting functions, is integral to successful financial management. It is the only way that a business can support all of its needs and those of its clients. By combining repetitive or common processes into a single location and across all departments, you will create a shared services center.

Since less than 20% of businesses leverage shared services, it will allow you to gain a competitive edge over other players. Besides, you will get to enjoy several benefits, such as fewer errors and a much faster cycle time. In fact, opting for a shared services center will allow you to meet all your goals and enable your business to get more things done. Moreover, you’ll complete more work in less time. Hence, you don’t want to overlook this bookkeeping strategy.

2. Encourage Strong Data Governance

Another excellent bookkeeping strategy worth looking at is the implementation of strong data governance policies. It is incredibly important to ensure clean and consistent data when it comes to general accounting. It is the only way that you can generate the right financial statements and financial reports, and get an accurate representation of the organization itself. It includes financial data and a chart of accounts.

By ensuring proper data governance, there is no limit to what you can achieve. Implementing a standard policy will ensure that you are able to get more done. Organizations that implement finance data definitions have an easier time reporting and meet all their KPIs compared to organizations that fail to do so. Moreover, you will get to perform much better as the possibility of making errors would be significantly reduced. You will also encourage better customer satisfaction and trust, strong compliance, and overall financial health.

3. Standardize Accounting Processes and Assign Process Ownership

If you want to improve the accuracy of your accounting records, including accounts receivables and the cash register, you have to standardize accounting processes and assign process ownership to specific employees or to certain members of your accounting team. Process standardization is critical to performance. It is actually considered a prerequisite for successful automation. Furthermore, end-to-end process management relies on shared services implementation.

When you standardize the accounting processes, you will be able to achieve common finance processes which are integral for adherence to process ownership. This has an overall positive affect on performance management, a better grasp of sales revenue, and streamlines the managerial accounting process. This means that you will have an easier time managing finances and identifying areas where you need to improve.

Leveraging process owners and process standardization pays off in the long run. You’ll improve communication between team members, make the most of varied capabilities, and smooth out any rough or incongruent aspects within your accounting process.

4. Striving Towards a Continuous Close

A notable bookkeeping strategy that you should consider is performing a continuous close and striving towards pre-close activities. Since the month-end close can be a frenzy of activity, you would have no option but to ask the accounting team to work overtime for which you would have to spend a great deal more money which may carry a negative impact on your financial condition. This is why you need to focus on ensuring a continuous close. It will allow the department to collect and analyze information on time. Besides, it can be quite stressful for your and your employees to take on the work at the last minute.

If you look closely at a leading organization, you will come to understand that working toward a continuous close is likely to even out all the work so that everything is completed by the month-end without delay. It is the only way that you can prevent your accountants or bookkeepers from working overtime. You should consider using cloud technology and automation to implement continuous accounting. It would allow financial data to be accessed in real-time.

Even when you perform some pre-close activities, it will become a lot easier to get everything done on time. This would prevent the likelihood of mistakes. You can rely on these activities to lower the cost of general accounting processes as well. Therefore, you don’t have any excuse to avoid this bookkeeping strategy.

5. Automate and Integrate Accounting Systems

In addition to the above, you should consider automating and integrating your accounting systems and processes. Even though automation is necessary for improving the performance of your finances, you first need to focus on understanding and streamlining the processes as it would allow you to maximize your return on automation efforts.

A commercial ERP software should help streamline general accounting and provide the results that you are looking for. It will operate as a primary system for general accounting. However, the emergence of cloud-based tools has changed the game. It has become a lot more affordable for organizations to improve their financial activities because of the availability of these products. As long as you take advantage of such tools, you will improve general accounting and reporting, which would have a positive snowball effect on business performance.

As you might already know, manual data entry is likely to cause errors no matter how experienced or careful your accounting team might be. For quality data, you need to switch to an integrated system. It will facilitate effectiveness and efficiency so that you don’t encounter problems later down the road. When you consider top organizations, you will come to realize that their internal or external system is linked and automated. Only through automation can you expect better KPI results.

For instance, you will benefit from correct journal entries when you opt for an automated solution. You should keep in mind that consolidated financial statements require the use of software to avoid the possibility of any mistakes. Otherwise, you could make costly errors that jeopardize your business. Don’t hesitate to put automation to work for you, your bookkeepers, and your management accountants.

6. Leverage Emerging Technologies

Lastly, you need to keep an eye on the latest technologies to ensure that you implement them early on. The emerging tools are there for a reason. You can use them to improve general accounting. Some examples include blockchain, cognitive computing, and robotic process automation (RPA). For those of you that don’t know, RPA is actually server-based, and it combines different processes with business rules or decision models without requiring much human oversight.

As more and more businesses realize that RPA has a lot to offer, it is in your best interest to jump on board. The last thing you want is to miss out on some amazing opportunities that may even improve your profitability ratio. You will be truly impressed by what the latest technologies can do for you. They can help your business unleash its full potential. The most successful bookkeepers, business owners and management accountants are those that leverage the latest offerings.

Conclusion

It is important that you adopt different strategies to ensure that your business succeeds. Consistently high business performance requires a high level of bookkeeping strategy and financial management. At the end of the day, it all comes down to having an open mind, getting the help you need, staying organized, using the tools at hand, and keeping up with the latest trends.

Sound Accounts helps business owners like you succeed with superior bookkeeping strategies that improve business performance and solidify long-term success. To learn more about the many ways we can strengthen your business, connect with us today.

For more information about implementing better bookkeeping strategies, check out our frequently asked questions below.

FAQ

How can accounting and better bookkeeping strategies Improve performance?

Accounting is considered the language of business. It allows you to create and refine your workflow, as well as minimizing mistakes. By ensuring that proper accounting practices are followed, you can expect your organization to succeed.

How Does Bookkeeping Improve Your Business Operations?

Bookkeeping improves business operations by ensuring that you gain access to accurate records which you can use for making decisions.

Great bookkeeping adds tremendous benefits, including improved services, a better handle on cash-flow statements, a streamlined accounting process, better performance management, and a closer watch on resources and items. It readies you for E-Commerce Capability and prepares you for better operational strategies, diversification strategies, and overall corporate strategies.

It also helps you make the most of your financial reports, financial statements, and other departmental reports, smooths over processes for employees so you can make the most of their capabilities instead of watching them spin their wheels on other things. It empowers your accounting research, improves professional services for your clients, improves client trust and loyalty along with customer experience, helps you navigate changing financial conditions, and with the right people in place, allows you to overcome the challenges of accounting.

How important is learning when it comes to finances, bookkeeping, and accounting?

It is important to stay current when it comes to ongoing education within principals and practices of accounting and economics. For a business owner, your grasp of financial and investment concepts will greatly affect your outcome and your position in the market. You can take online classes, join professional groups, get mentored by a professor of accounting, read the journal of accounting studies and the journal of accounting research, and shadow excellent bookkeepers both within your organization and others finding consistent success.

What are 4 of the most important activities In bookkeeping?

Bookkeeping involves many practices, some simple, many that are more complex. These are simply 4 of the most common practices:
- Analyzing financial transactions and ensuring that they are assigned the right account.
- Writing journal entries that are debited and credited to the appropriate accounts.
- Posting entries to relevant ledger accounts.
- Adjusting entries once the accounting period ends.
August 17, 2022