Tips for Common Small Business Accounting Challenges

Over the last few years, we’ve helped hundreds of small businesses create and manage the custom accounting and bookkeeping systems and procedures necessary to make the most of their financial data. During this time, we’ve encountered several common challenges and situations. Following are a few tips we wanted to share to help others deal with these everyday issues.

First, virtually all of our clients have confessed the challenges of their pre-engagement struggle with the timing of moving to an outsourced accounting solution (rather than continuing to manage in-house). So, when should you hire/engage an accountant/bookkeeper? Obviously, cost is the first concern related to the decision to move from DIY to professional services, but there are additional issues that must be considered. The experience and knowledge of industry-specific accounting best practices offered by professional accountants generally far outweigh any costs associated with outsourcing. This unique insight provides valuable time-saving and compliance benefits that ultimately pay for themselves. In addition, the third-party objectivity helps to increase accountability and reinforce realistic operational procedures and goals. Our clients have told us that, when measured against the investment in professional accounting and bookkeeping services, the benefits generally outweigh the costs and the move should be considered and made as soon as reasonably affordable.

Second, regardless of the age of your business (but especially in the early stages), we have found that it is crucial for owners and management to “know their number”. This number is the minimum monthly profit target. By identifying a solid and realistic goal and aligning all of your company objectives and strategies with the realization of this target, you are taking critical steps toward lasting success. The challenge here (besides dedicating yourself to the concept and achievement of a “number”) is accurately identifying the supporting details that will help you to come up with a minimum monthly profit target. This means developing an accurate system of expense and accounts payable tracking, then realistically forecasting the results of sales and marketing efforts to arrive at a substantial, but achievable goal.

Third, though it may be tempting (and personally rewarding) for owners to see a large amount in the receivables column each day, it is far better to realize and utilize that income than it is to maintain it on that side of the balance sheet. That means you, as the business owners, need to remain steadfast and diligent in your collection efforts, only truly valuing those receivables once they have been deposited into your bank and made available for ongoing operations and objectives. We’ve seen far too many clients celebrate seeming AR successes, then turnaround and deal with cash shortfalls and writing off bad collection amounts. Too many businesses (especially startups) are just happy to have customers and income and don’t realize that collecting on amounts owed to them need not affect their relationships with and service to their customers. Recognize that you’ve provided a product or service of value and don’t count your income until it’s cashed!

Finally, we always instruct our clients to manage their expenses daily, rather than periodically. Too often inexperienced business owners bypass this daily task in an effort to save time and focus on other operational aspects. Unfortunately, this puts them at risk of surprise cash flow issues (and let’s face it, cash flow is the life blood that pumps through a company’s veins, keeping it alive). When you manage your expenses to this greater and more frequent level of attention, you are able to identify potential issues and enjoy more reaction time.

Ultimately, accounting is about producing, analyzing, understanding and making the most intelligent use of your company’s financial data. These simple tips should help any company to successfully deal with the common challenges standing in their way. If you have any questions about these tips, or need help with the accounting/bookkeeping challenges of your small business, contact Lescault and Walderman at 866-496-2042.

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