As a business owner, you are responsible for all aspects of your business, including the financial side of things. Here are three bad bookkeeping habits you should avoid this year if you want your business to have a healthy financial year.
#1 Failing To Understand What Key Accounting Metrics Need For Business
In order to keep your business successful, you need to understand what key accounting metrics mean in relation to your business.
If you feel overwhelmed or have no idea what key accounting metrics means for your business when you talk with your accountant, you need to sit down with your accountant and have them explain what they really mean. Understanding key accounting metrics will help you make better and more informed decisions for your business.
Here are a few key accounting metrics you need to make sure you understand:
- Real Revenue Growth
- Operating Expense Control
- Return On Assets
- Cost Of Capital
- Gross Profit Margin
#2 Failing To Keep Up With Your Invoices
Another big mistake you need to work on avoiding this year is failing to keep on top of invoices. The first step in regards to invoices is making sure that you send out invoices as soon as you provide a company or person with a product. If you already have this step down, you are on your way to avoiding this mistake.
However, sending out the invoices is not enough. You also need to keep track of all paid invoices, and send out overdue notices if you do not get paid in 30, 60 and 90 days. If you have customers who fail to pay after 90 days, you need to have a collections process set up to handle those invoices. If you don't get paid for the work you do, you will not have the cash you need to keep your business afloat.
#3 Failing To Standardize Monthly Financial Reports
You need to create a monthly financial report process that is standardized and comes out at the exact same time every month. Standardizing your report will make it easier for you to compare how your business is doing from one month to the next. It will make it easier for you to identify business trends and act upon them. It will also help you understand better what your reports mean and how they reflect upon the success of your business when you are seeing the same thing every month.
Work with your bookkeeper to produce a standardized report to use throughout the year, and make sure you understand how all the numbers and metrics in the report relate to your business.
If you avoid the three big bookkeeping mistakes outlined above this year, you are on your way to having a healthy financial business year. Remember, in order for your business to succeed, you need to understand how the numbers relate to your actions within your business. Contact a business, such as Blueback Accounting, if you have questions about proper accounting practices.