Often times, in the hustle and bustle of everyday business operations, Tyler TX business owners keep many of the financial details of running their businesses in their heads. And without a doubt, this practice does have its advantages–no concerns about a system crash, no new software to figure out, extra time to focus on business operations, plus it allows entrepreneurs to adjust budgets without having to spend time at a desk with data and spreadsheets.
But while this practice offers short-term rewards, lack of effective systems and processes can lead to some unpleasant surprises, including potential tax penalties or trouble with the IRS. Additionally, it is hard to make and achieve long-term business goals and plan for potential expenses without having a handle on cash flow, particularly in businesses with seasonal income fluctuations.
Having basic bookkeeping systems and processes in place can help entrepreneurs plan effectively, and ultimately provides more time to do what they do best- focus on running the business.
Improving Your Current Business Systems
Here are a few simple tips to establish or improve your current systems:
1. Keep an Eye on Receivables
Late or unpaid invoices hurt your cash flow and make planning for monthly expenses difficult. Send invoices at regular times of the month, and put a process in place for sending a second invoice or following up with a phone call after two weeks. Establish penalties for late payments at 30, 60, and 90 days.
2. Put Money Aside Regularly for Paying Taxes
Failure to pay taxes on time can lead to heavy penalties and interest, which are avoidable expenses with proper planning. Set a regular amount of money aside and record deadlines on your calendar, allowing for plenty of prep time.
3. Record Deposits Accurately
Whether it’s through an excel spreadsheet, accounting software like Quickbooks, or through a bookkeeping or accounting service, keeping track of your deposits can help avoid unnecessary taxes if the deposits are mistakenly reported as income.
4. Track and Record Expenses Accurately
A business credit card used exclusively for business purchases can be extremely effective at keeping track of business expenses. Many business credit card statements automatically categorize expenses. Using a business account exclusively helps to avoid lost receipts and lost deductions at tax time.
5. Plan for Large Expenses
Software upgrades, large inventory purchases, or any other sizeable expenses should be planned and budgeted for throughout the year, or even two or three years in advance. This helps avoid taking out unnecessary loans, and leaves more cash available for everyday operations and inventory purchases.
We hope these simple tips will help establish or improve the current systems of your Tyler business.