Lots of new business owners put their bookkeeping to one side because they’re so busy with the huge work load of setting up a business.
That’s understandable, but if the books aren’t organized, troubling times lie ahead.
For example, we had a client who was a landscape gardener. He was very good at what he did and charged a good labor rate. However, he started to fall behind with his bills and started to receive lots of red letters. He came to us with this problem because he couldn’t understand how he worked so hard, charged a good rate and was still falling behind on payments to suppliers.
We took a close look at his invoicing system and methods of collecting payment from customers. We discovered problem areas such as in inconsistent invoice numbering and no proper record of which customers had paid.
We spent time reconciling his invoices which led to us discovering significant sums of money he never received because it was overlooked. We spent time helping him put a good and robust system in place. That meant a strong cash flow and no more red letters.
For most businesses, the only real way to get the books in order is to use an accounting system and to make a point of keeping it up to date.
Once your books are in good order, you’ll be able to stay on top of how much each customer owes you. You and/or your accountant will also be to generate useful reports like aged debtor and creditor reports so that you can understand your cash flow much more easily.
This snippet is thanks to www.freshbooks.com: https://www.freshbooks.com/blog/6-ways-to-avoid-cash-flow-problems-in-your-business, and is written by Lee Murphy.