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Business Solution: 5 Ways To Clean Up Your Finances

It’s easy to neglect certain sound financial practices with your time at a premium when running a business, so getting into the habit of performing certain tasks will help ensure your business continues to prosper and you can quickly spot a financial trend before it becomes a problem.

Along with better financial practices, it’s always worth checking you’re making the most of technology to make your financial business life easier such as using the latest accounting systems and software and related easy to use and print paperwork.

1. Hire a financial professional

You may already have an accountant or perhaps your lawyer has knowledge of financial matters.

If not, it’s well worth hiring a financial expert - it’s not just the preserve of larger corporations. They can ensure you prepare materials properly for the IRS (Internal Revenue Service) when it’s ‘tax time’ and also keep you informed of any changing legislation relating to business finance and accounting.

An expert can also help you interpret your business’s figures in terms of how it may - or is - affecting cash flow and whether you’ll meet your future objectives. Having data without the ability to analyze it is not much good for you.

In time you can learn from them how to understand financial figures more clearly, and it’s a good idea to keep abreast of financial matters in a general sense.

2. Separate business and personal finances

If you’re mixing your business and personal finances, then it’s important to separate the two. It makes tracking your business expenditure far easier and reporting for tax purposes will also be a lot less hassle when the time comes.

Don’t be tempted to ‘dip’ into personal funds to pay your business or the other way around. This can make your records disorganized and create issues for preparing tax assessment figures.

3. Sort out your filing

If you don’t have an efficient filing system, it high time you got one.

There’s nothing worse than an important document going astray because it ‘got lost’ or was misfiled. It’s a lot easier with an efficient filing system to be able to round up the paperwork you need when preparing your tax affairs or conducting a ‘financial check’, and you may need certain documents if you’re ever audited.

4. Monitor cash flow

Cash flow is the lifeblood of a business; you could have a product that ‘flies off the shelves’ but without good cash flow your business could struggle.

Setting up a cash flow record and keeping a regular check on it is key to managing cashflow. Cash flow is literally the ‘flowing’ of money in and out of a business, and poor cash flow can cause a seemingly-successful businesses to founder.

Maybe your timing is off? Perhaps by rescheduling when you pay certain suppliers you can have a healthier picture?

Perhaps your customers are taking too long to pay and you have several overdue accounts? Do you have a system in place to chase overdue invoices? Don’t let money you’re owed become overdue through simple lack of follow up.

While you’re at it maybe review how long your payment terms are? Even reducing the time given for your customers to pay by a few days might make a significant difference to your cash flow.

5. Audit your outgoings

In the same way householders are encouraged to ‘shop around’ when it comes to costs of utilities and insurances, so you should check you’re getting the best value from your suppliers.

For example, if your business has grown, you could be entitled to better terms from a long-standing supplier because your volume of orders has increased.

Check these and other expenses and cut out waste:

• Loans and credit: are you paying too much for a loan or other business credit? Check your current lender against others

• Insurances: some insurers are notorious for charging existing customers more than new ones so check your next renewal prices against competitors

• Other suppliers: laborious it may be, but go through them all down to your local stationer or drinking water supplier to check prices

Waste: check you’re not paying for things you don’t need or use. For example, if an expensive copier sits there hardly used and you’re paying a hefty rental then don’t renew it (or terminate it immediately if possible).

Any online or magazine subscriptions you’re not getting value from? Cancel them if not.

And finally - profit

Is your product or service still priced at a rate enabling you to turn a profit? It’s easy in some markets to keep prices the same while your expenses can creep up over time, so ensure your pricing is still realistic for the conditions of the market as it is.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes

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