5 Must-Read Tips for Accounting for Small Business
These are the best five must-read tips for accounting for small businesses—suggestions that will help you manage your company’s accounting and finances during this challenging year.
No one could have predicted at the beginning of 2020 the rough waters ahead. But isn’t that like life? Many projects begin with optimism and enthusiasm only to find setbacks and challenges along the way.
As a small business owner, managing accounting for small business operations is essential to your company’s financial health and longevity. The following five tips are great for the current uncertainty and useful information in general for all small businesses.
Five Tips to Improve Accounting for Small Business
Accounting for small business doesn’t have to be complicated. If you’re struggling to maintain accurate books for your small business, turn to ERP software for a robust solution that can expand as your company grows. With good accounting software behind your business and the following five tips, you’ll have your company on solid financial footing.
- Run several “what if” business scenarios.
Accounting for small businesses includes running “what if” scenarios. These scenarios enable companies to perform contingency planning, assess the impact of various economic and other factors on their operations, and plan accordingly. Many companies perform two what-if scenarios: what if we fail to meet our financial objectives, and what if we meet them? But instead of running just two scenarios, consider running several to see what the economic impact upon your business might be. Then, share the results with all teams so they can prepare and plan accordingly. For example, if sales are sluggish, the marketing team can design their own “what if” scenario and action plan to reinvigorate sales.
- Avoid discounting.
Maintaining gross margins is essential for long-term profitability. When companies face slow sales and declining revenues, their first action is often to put items on discount. This undercuts gross margins and “trains” customers to expect sales. It leads to a vicious cycle of customers waiting to buy products until they are on sale, companies responding by slashing prices, and customers holding out for the lowest possible price. You may need to adjust your projections and tighten your belt, but by avoiding discounted prices, you’ll preserve gross margins and avoid the pressure to put items on sale.
- Invest in your business.
When times are uncertain, there’s a tendency to hold onto earnings tightly and avoid spending. Instead, consider investing in the long-term success of your business. This may look different for various companies. One business may choose to invest in upgraded software and systems. Another firm may invest in its advertising and marketing to improve customer acquisition. Still, another may update their office décor. There’s no right or wrong way to invest in your business, but whatever you choose to invest in should be for long-term impact.
- Continue practices that work.
During the early days of the global pandemic, many companies struggled to put into place new practices that would enable them to work remotely, serve customers, and continue operations. Some of these new practices may have been surprisingly effective. Companies that swore they would never be able to function with employees working remotely found, to their surprise, that employees were happier and work got done just the same with people working from home as from the office. Now is a great time to review all the emergency processes and procedures you put into place to deal with the pandemic and consider which ones to adopt permanently. For example, enabling remote work may allow you to hire the most talented employees even if they live outside of a reasonable commuting distance to your office.
- Embrace the digital transformation.
The stay-at-home orders forced many companies to fast-track their digital transformation. Some discovered, out of necessity, that cloud-based software helped them continue operations when people were forced to work from home. It’s time to embrace the digital transformation sweeping the nation and update outmoded systems. New enterprise resource planning (ERP) systems can help your company share information without interruption, access real-time data, and monitor operations no matter where you’re working. It’s a plus for accounting for small businesses and all other departments, too.
Change isn’t easy, but recognizing its positive impacts can make it less demanding. By using these five tips, you’ll be able to shape a better future for your business.