**This is a collaborative post** As your small business grows, accounting becomes a bit more complicated so it’s important to stay on top of finances. That’s not to say you need to know everything there is to know about accounting before you start on an expansion programme, but it helps if you know something about the areas to concentrate on and what you should be monitoring.
Create a Financial Plan
You probably had some kind of financial plan before you launched your business, even if it was just in your head. As the business grows, however, and becomes more complex, having a written plan can really help you firm up ideas and become more confident.
A financial plan will help you set goals, manage your cash flow, and make informed financial decisions.
It’s best to create a budget and stick to it as far as possible. Include potential sources of revenue, what your expenses will be, and plans for any future investments.
Learning about accounting will guide you, but you could also hire a professional accountant to help your financial planning.
Invest in Accounting Software
As your accounts become more involved, you may find it difficult to keep track of finances using spreadsheets or notebooks.
With accounting software, you can automate many financial processes to make it easier. It will allow you to quickly track your expenses, revenue, and cash flow, as well as generate financial reports and manage invoices and receipts.
If you haven’t done this yet, it’s worth exploring the options. Some service providers offer a help line, and even waive subscription fees if you link certain bank accounts. Linking business accounts to online software means you don’t have to manually add each and every transaction, which can save lots of time. You do, of course, still need to check and verify each automated entry.
Hire an Accountant
For lots of business owners, accounting is a rewarding exercise. For others, not so much. If you’re in the second camp and find doing your accounts a chore, consider hiring an accountant or bookkeeper to keep you on track.
Bookkeepers will help with daily updates and keep your books in a format that accountants prefer, while accountants will collate all the information and prepare your end of year taxes and reports. Accountants can also help with business advice, ensuring you make good financial decisions and stay in compliance with current regulations.
Manage Cash Flow
Cash flow is critical for any business, and it becomes increasingly important as your business grows.
Your accounting system should let you track your cash flow so you can identify potential bottlenecks and make sure the available funds will cover upcoming expenses. Alternatively, if you don’t have the funds to solve identified bottlenecks, your accounts can lead you to different areas of the business you could divert funds from.
Review Financial Statements Regularly
With a larger business, it’s important to review your financial statements regularly. These provide a clear picture of your business’s financial health and help you make informed financial decisions.
Review your balance sheet, income statement, and cash flow statements at least once a month, and make any needed adjustments in your daily operations. You might, for instance, see ways to trim regular expenses to make your finances work more efficiently.
Control Your Inventory
If you haven’t already, and your business deals in physical items, put a system in place to track your inventory levels so you can meet customer demand without overstocking.
Inventory or stock management software can help, but so can regular stocktakes and the timely ordering of supplies. It’s a fine balancing act but can really help with cash flow if you’re not buying in more than you need to.
Separate Business Units
When your business reaches a certain level of growth, it might be helpful to separate the various units so you can see how each is performing. You might, for instance, want to monitor what you’re spending on IT, or look just at the retail side of your operation. Dividing your business into units means you can track the revenue or expense for each one.
Of course, while your business is very small this might be a step too far. But if you see a good level of professional growth in your future, it’s worth learning about business units and how to account for each one.
Stay Up to Date on Tax Laws
This is really important as a business grows, since you may find additional tax laws and regulations apply. In the eyes of HMRC ignorance isn’t really any defence, and you’re expected to know which business laws affect you and how to stay compliant.
For this, you need some accounting knowledge. To really understand the ins and outs of business accounting, you could take a course (even study accounting online if that helps) or hire a trained professional. Penalties for getting it wrong, even accidentally, can be quite heavy.
Managing business growth can be exciting but also a bit daunting. Accounting is a key feature in success, so making it a priority can help with healthy, financially secure, business progression.
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