Check that your costs haven’t gotten away from you
The most important misunderstanding to clear up, first and foremost, is that your overheads are where you expect them to be. Utilities, service costs, and other overheads can increase over time and if you’re not tracking them, they can end up running away from you. Update your accounting if that’s the case and look for ways to reduce your overhead spending.
Ensure you’re getting paid
If you work through invoices, then neglecting to follow up on those that have to pay can result in pretty huge discrepancies. You might account for the profit you’re owed but not have in the bank just yet. Services like Invoicefinancingaustralia.com.au can help you clear those discrepancies when you need that money right now. But a more thorough method of tracking invoices and making follow-up phone calls or emails can prompt your customers and clients to pay what they owe in a more timely fashion. Don’t neglect the option to adding a contractual clause of late payment fees, either.
Account for future profits
Perhaps you’ve taken on a large task that you haven’t completed yet or billed for yet. Improving your invoicing system isn’t applicable here so the best thing to do is make sure you’re keeping future profits separate from the money you already have or the money you’re waiting to come in. For cash flow planning purposes, it’s important to note future profits but don’t let them get tangled up in your understanding of your existing finances as they currently stand. After all, future profits contribute to your business net worth and it’s worth always knowing that.
Track it all in real time
Human error can be a huge risk factor, too. Bpoconnect.com.au shows how you can start eliminating it from the business by relying more on accounting software. While you have to do the manual work of tracking and adding expenses and profits yourself, much of the calculation is automated, meaning that you’re not going to have an extra zero here or there messing up the totals. Paper records are still necessary as they present the backup you need, but the right software can keep you on the right path.
It’s important to track what money you plan on spending or what money you’re waiting for in future. However, it’s just as important to make sure you keep it separate from your running account of how much the business actually has. Keep your net profit aside from your ongoing cash flow.