Category Archives: Accounting

While you might be aware of how to slash costs and get paid faster, what about cash flow? Managing cash is undoubtedly an inevitable problem. It can be a challenge for even the most seasoned business owners. Therefore, there is no doubt that understanding and managing cash inflows and outflows is crucial to a company’s financial stability. The complexity of the cash flow problem stems from the misconception that positive cash flow – when more cash comes in than goes out – generates profit. Extra cash in the bank means the company has enough cash, right? Not always. There may be money in the bank, but some of it is probably going towards salaries, rent, bills and so on, which means that this money is not a net profit. If you don’t make the necessary payments, the cash flow can be negative. When more money leaves the organization than comes in, positive and negative cash flow affect all businesses. There is no way around it. However, there are strategies to manage cash flow to maximize profitability. Here are some intelligent ways to do it.

 

#1. Create a Cash Flow Forecast

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It’s important to forecast your company’s cash flow. That helps reduce uncertainty by anticipating ups and downs in cash flow and reflects business cycles. If you ever have a low or negative cash balance, you could be in trouble. Be careful when making predictions. Start with the amount of cash in hand. Then list the expected payments for each month, such as salaries, profits, rent, marketing, inventory purchases, loan repayments, tax obligations, new equipment purchases, etc. Then list the expected income for each month, such as customer payments, investment income and grants. Finally, deduct the costs from each month’s that income. To improve cash flow, review your spending plan and, if necessary, break down large purchases into smaller parts. Then compare your actual cash flow with your forecast.

 

#2. Reduce Overheads

Evaluate your current overhead costs and see where you can reduce them. Try to use your money efficiently and reduce waste. What expenses can you do without? When renewing insurance, etc., look around for the best rates and don’t renew without researching them first. Strategies may also include tax cuts, managing employee overtime, and better management and compliance. If possible, negotiate with suppliers to get a better price or contract—budget for estimating and controlling costs.

 

#3 Inventory Management

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Regular inventory checks save money and time. Establish and maintain optimal inventory levels. Too much inventory can lead to extra storage costs, possible destruction and loss of money. Too little stock can lead to lost sales and business interruption. To maximize cash flow, try to implement a system for ordering inventory on time.

 

#4 Debt Management

Good debt management eliminates bad debts, ensures healthy cash flow and helps you get payments faster. It also enables you to maintain strong customer relationships. Debt management strategies include:

  • Setting credit limits
  • Invoicing before or immediately after services are rendered
  • Short payment terms
  • Collecting interest on late payments
  • Offering small discounts for early or partial payment, and
  • Checking the creditworthiness of customers.

Ensure your terms are clearly stated in all contracts and invoices to customers, and make it easy for them to pay using electronic payment options.

 

#5 Raise Pricing

Many businesses are afraid to raise prices because they fear it will lead to lower sales. Prices should be reviewed annually. Experiment with different prices until you find the perfect amount. How much are customers willing to pay? You can’t know unless you take the chance to change. When introducing price increases, keep an eye on your key performance indicators to see what effect the price changes will have on your business.

 

Need help with business and cash management in the surgical field? Schedule a free consultation with the experts at Anaesthetic & Medical Billing Services. They’ll work with you to develop an action plan to improve your company’s bottom line.

 

 

Accounting is a fundamental part of businesses. Even though accounting mistakes can happen occasionally, but wouldn’t it be better if you could avoid some common mistakes? Here’s a list of some accounting mistakes that you can avoid with proper planning and preparation.

#1. Lack of Organization

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Do I really need to mention how accounting requires excellent organization skills?

As an accountant, you will have to record every single transaction, store (or now digitize) receipts for future use, calculate taxes and so on. However, if these pieces of information are not stored properly, it is obvious then that you might miss a crucial transaction or lose an important receipt. And, what happens when the tax season comes? You could get in deep trouble, obviously!

#2.Not Following Bookkeeping Procedures

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Nowadays, it is recommended that even small enterprises, self-employed persons and freelancers should make use of formal, detailed and documented methods to manage accounting procedures and also to perform other routine tasks.

One effective procedure is to set up standardized forms and checklists to complete so as to ensure consistency and accuracy.

Let me give you a simple example: You can put up a process for setting up new vendors and for that you will need the vendor’s name, address, telephone number and Employee Identification Number (EIN) and other crucial documents such as insurance certificates, letters of recommendation and signed contracts might be required. And, after entering these pieces of information into your accounting system, payments can be processed.

Remember that it will cost you a significant amount of time to develop such a standardized form or checklist as you will have to gather information from your vendors and then have a sort of written policy for your employees to follow.

#3. Failing To Be Accounting Software Shrewd

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Did you know that in the rush of setting up a business, many business owners do not get enough time to correctly learn the accounting software that they have chosen to use?

And, of course, when you don’t know what an accounting software is capable of doing, it is evident that you would make some mistakes or miss out on some vital functionality. Additionally, some incomplete or wrong information can lead to bad business choices.

#4. Mixing Professional and Personal Finances

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By mixing your business and personal finances, you are making one of the most common accounting mistakes that most business owners make. Therefore, it is essential to keep them separate and to keep a detailed track record of what really happened in your business and what is specifically related to your personal use only.

#5. Throwing Away Receipts

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Receipts still count today and even though they have become digitalized, there are some specific cases where they need to be recollected as they can provide solutions to mistakes or fill the gaps in bookkeeping records. Besides, during tax time, receipts can provide additional deduction opportunities.

#6. Making Maths Mistakes

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I often wonder who are those weird people who love mathematics (apart from mathematicians, of course).

Let me tell you that despite using automated accounting solutions, many people often tend to make maths mistakes (especially when they are in haste to get the job done after a long tiring day). But, remember that these mistakes (even if they arose from typos) can prove to be very costly.

#7. Failing To Reconcile Accounts

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Reconciling is a critical process that involves checking an account balance as recorded on your books is correct and accurate and ensuring that it matches the actual bank account balance. And, if there is a gap between the two accounts, this means that there is an error and if you want to prevent this small issue from worsening, you need to give immediate attention to this problem. Moreover, if you review and reconcile your business bank accounts on a regular basis, it will help you to catch any fraudulent transactions that may have occurred within the organization.

#8. Not Backing up Data

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How would you feel if the device on which you stored all your business’s financial information was hacked or stolen? And, worse: what if you didn’t have it backed up at all?

Well, this issue often happens with many accountants who feel as if their lives have been turned upside down. However, good news is that there are some pretty good backup options available nowadays that can save you from this crisis.

Will you follow these tips? Please share your comments!

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