Don’t run out of money! Watch this video to learn about the 5 traps that snare too many business owners and how you can avoid them.
1. Too busy selling and not invoicing If you don’t sell you don’t make money. Selling is step one. You need to fulfill, invoice and collect. Owners get the sale and fulfillment done but then what? The sales reports are too low. We forgot to invoice! Or, you invoice but payment is slow. The invoice has to get approved and posted, then a cheque cut. There may be errors or a disputed amounts. The invoice gets lost. The signing person is on vacation etc. You need a system to ensure timely and accurate invoicing.
2. Too busy selling and invoicing, but not collecting Lots of selling, invoicing and sales are up! Time to pay vendors and owners but no money! How is that possible? There are more sales and less money? Look at the Accounts Receivable. It’s high? How can there be so much over due? No one is collecting and we are back to scenario 1. We cannot get ahold of the client, the invoice lost, it’s being disputed, the next cheque run is not until….Frustrating!
3. Cost of sales not in line with sales prices Costs are tallied up, the market investigated for pricing and gross margins determined. Overhead costs added and a sales price determined. Sales are good. Actual costs are in and noted in the back of ones mind. Time passes. Things change. Market prices change whether we change ours or not. Costs increase and new costs appear. The year-end accountant asks why our margins are down. If bookkeeping is current, the numbers should be looked at monthly. Seeing reports months later means no correction or change until it’s too late.
4. Expenses are not being monitored and getting out of hand Initially you research into what something costs and do some comparative shopping. Time passes. Your use of the expenditure changes. The supplier price changes. Long after costs have risen someone notices the increase. Sales have increased so some of these overhead will too, right? You should consciously monitor expenditures. This can be done easily if the accounting is up to date.
5. Your cash available is not the balance online It’s never a good idea to base available cash by the bank balance online. Cheques written may not be cashed and things coming out in the future are not considered. How should you make expenditure decisions? Have up to date bookkeeping that includes postings of future expenditures booked ahead to allow a cash management balance.
To sum up: Be organized and up to date in your accounting. No one says the owner has to do all of it, but they have to make sure someone does!
Have a question about accounting, bookkeeping or money management? Ask our President, Dianna.
Thanks to our friends at RGD for the summary of this presentation.