The winter and tax seasons are finally over, and beach days are within reach. As a business owner, it can seem like the work never stops, but by taking the time now to get your financial house in order, you can free up your schedule this summer for much needed downtime with family and friends.
Towards that goal, New York Life identified financial best practices for business owners to take advantage of this spring to help ensure smooth sailing for the rest of the year and beyond.
Setting up an organized bookkeeping system will save time and make it easier to stay on top of your business. For Maria Vasquez, a New York City based small business client of New York Life, going paperless made all the difference. "Since switching from paper-based bookkeeping to an accounting software, I have been able to clear out filing cabinets filled with old invoices," she says. "It took some time for me and the team to get it set up and get used to the system, but now it is so easy to use, and it saves me so much time."
Here are some tactics to get started with streamlining your business' bookkeeping:
If you don't keep on top of accounts receivable, you could see past due payments pile up and have a significant negative impact on your business cash flow. Like many of her business owner peers, Vasquez's "major struggle is cash flow, due to not receiving payment from [her] clients in a timely manner." To help tackle this issue Vasquez and her team "take time to call clients for collections at least once a month. We've found that most of our clients will pay promptly after a call."
Here are four practices to consider for your business:
Identify if your pricing is at the optimal point. Among the questions to ask are whether you can lower your prices and attract more customers and ultimately boost your profit—or raise your prices and retain enough customers to increase your profit.
For Vasquez, a review of her business' fees led to a rare but necessary price increase. "We've been in business for 15 years and had rarely increased our hourly rate because we didn't want to upset our customers—they have bills to pay, too," Vasquez says. "After realizing our pricing needed to better reflect our expenses, we finally adjusted our rates, and none of our customers were upset—the cash flow is looking a lot better."
To get started, here are three strategies for you to take action on:
Often, people sign up for automatic payments for services and/or subscriptions and forget to cancel them when they no longer need them. This is the perfect time to review outstanding contracts, insurance policies, etc. As your company grows—and evolves—you may need to modify the details of these contracts and policies. Vasquez found it's worth the effort to audit these expenses.
"I am so busy day-to-day, and some months I just don't have time to analyze every credit card statement in detail," Vasquez says. "I recently did, though, and realized I had auto payments set up for services I don't even use regularly. Now I make sure I look more closely because even little fees add up."
Here are some tips to get you started:
As you review models for bookkeeping, accounts receivable and pricing, you should also identify and analyze trends in each of these areas. Trend analysis helps you understand what to expect from your business and can help you set realistic—and successful—outcomes.
"I recognize the importance of staying up to date with the numbers, so I meet with our accountant and insurance agent a few times a year and talk about the business," Vasquez says. "They are always noticing trends I might have missed, and it is really helpful to know these things for planning purposes."
Effective trend analysis methods include:
With the closing of tax season, it's the perfect time to give your business a fresh start by taking the time to do a thorough cleaning of your business and financial practices. Every business is different, but finding ways to make the most of technology, automation and support can get your business running like a well-oiled machine, so you can look forward to enjoying your summer, worry-free.
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