Are the decisions we make the best ones for ourselves and the company? This question is more than likely something you have asked yourself at any given moment in time- sometimes multiple times a day. There are some very basic financial and accounting practices that have been proven to be sound through the ages. Here are 4 best practices to help you keep everything on track and in line.
Automate when possible
Staying on top of your companies’ numbers is very important, but it should not be something that takes an infinite amount of time. If your company has the ability to automate the most basic of the mundane bookkeeping, you will free up managers to complete other tasks that could be of higher importance. Usually, a good way to achieve this for your company is investing in a strong accounting software package and allow that software to save you time and money on day-to-day accounting.
“Cash … is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent” – Warren Buffet
Money runs your business, whether it’s the people working for you getting paid or consumers buying a product. Maintaining a cash worksheet to monitor cash balances effectively and in an efficient manner should be step one. If cash is not always available, you may want to consider starting talks with your financial institution and find an agreement for a line of credit or perhaps a receivables factoring agreement that works for your company. Working towards shortening the cash cycles of invoices is something that should not be overlooked, especially with the ability to set up automated invoices that are sent via email, and customer portals for self-service payment.
Maintain Thorough, Organized Records
Being sure that your company is keeping clean and very detailed records on file for an audit is essential. There are established guidelines on how much your company needs to keep on file and for how long. Your company should be ready for an audit from the IRS, an investor, or just your annual auditors at any moment. Keeping these records organized reduces the stress when those audits, scheduled or not, happen. Scanning documents for storage in either your accounting system or a document management tool can provide much easier access than digging through years of paper files.
You and your company have to figure out what works best when it comes to inventory. Make sure that stock levels are at appropriate levels and cycle counts are established. Monitor stock levels through an automated process. This allows you to identify slow-moving items and potentially cut back on those required stock levels. It can also help identify shrinkage and obsolete products sooner. Gauging an accurate level of inventory will not only help your company be more effective but also help reduce costs across the entire company when done properly. As most popularly said by Warren Buffet, “The most important thing to do if you find yourself in a hole is to stop digging.” And inventory can be one of those holes if your company is not careful.