Your financial system should be as precise as the grooves in a vinyl record. A solid financial system includes components like your accounting software, purchase approval process, receipt collection process, system for budget creation, and even your point-of-sale (POS) software. These are just a few examples; anything related to handling finances is part of your financial system.
A financial system should always make use of policies, systems, and software in two ways: to increase efficiency and reduce administrative costs. You want a financial system that doesn’t waste time or money and supports the financial success of your business. This can be accomplished with the following strategies:
Outsource administrative tasks yesterday
If you’re not outsourcing a good portion of administrative tasks, you’re wasting valuable time and payroll funds.
An overwhelmingly high amount of administrative spending in the U.S. supports the use of outsourced accounting services. That number is $2.87 trillion per year, to be specific. This number shouldn’t be that high. It points to widespread inefficiency. Inefficiency leads to loss of productivity. Outsourcing has been proven to increase productivity because it saves businesses time and money, which makes operations efficient.
It’s not just big corporations that are burdened with the minutia of crunching numbers and keeping track of budgets. Small businesses spend about 240 days each year on administrative tasks, highlighting the need for outsourcing.
Several benefits to outsourced accounting are explained in a recent article published by Ceterus. A significant benefit is access to an entire team of accounting professionals. This access means you can get help with bookkeeping, taxes, planning, and any other financial task. Don’t put all financial tasks on your in-house accountant. It will cost you more, and might stress them out if they’re not a tax expert. If they’re not a tax expert, you shouldn’t have them work on tax-related tasks.
Another benefit to outsourcing accounting tasks is having your remote accounting team crunch numbers in the cloud. Cloud-based accounting provides convenient access to your financial data from any device. When your files are ready, or you need to review something, you’ll get an email with a link to view it immediately. In the cloud, you can communicate quickly and easily with your team, and make notes for them without having to send them through email.
Track income and expenses on a daily basis
It’s helpful to know exactly how much money you expect your bank account to contain on a daily basis. This is accomplished by tracking expected and actual income and expenses daily.
For example, say you have $175,000 in your business account today. In seven days, you have a bill due to a vendor for $75,000. In ten days, you have to make payroll for $20,000. In eight days you’re expecting some invoices to be paid in the amount of $40,000. You know you can’t count on receiving all of your invoices on time. You know some (or all) will be late. If you don’t have at least 50% of those invoices in the bank by their expected due date, you’re in trouble.
Tracking your finances daily will give you warning about any foreseeable financial trouble. For instance, if your bills are due three days after an unreliable client’s invoice is due, you’ll have time to cut immediate costs to make sure those bills are covered. You could even take out a short-term loan to avoid being late with your bills to maintain vendor trust.
The bottom line is, tracking income and expenses on a daily basis empowers you to make responsible decisions.
Choose software wisely
Maybe your company is tiny with almost no budget, and you’re going to handle your own finances. Make sure to select financial software with extreme caution. Don’t take marketing messages at face value. Dive into a full-scale demo of every piece of software you can get your hands on. Find out what they do and where they fall short.
Read reviews and summaries online to get many perspectives on what each piece of software does; how it’s strong, and where it’s weak. Read articles like this one published by LifeHacker reviewing five personal financial tools. Gather opinions from different industries to find out what potential issues you’ll face with each.
Research and testing will prevent you from putting all your financial data into one program, only to find it lacks an important feature you can’t do without.
Once you implement a strong and efficient financial system, your money, time, and mind will be freed up for bringing your business to success.