Every small business has a variety of financial transactions to process and monitor including accounts receivable, accounts payable, payroll, project accounting. This can be overwhelming, especially for business owners who are not experts in finance. To help businesses become more efficient when it comes to handling finances, we gathered different financial streamlining tips from experts.
Here are the top 21 business financial streamlining tips from the pros:
1. Establish a Succession Plan
Jay DesMarteau, Head of Commercial Specialty Segments, TD Bank
Part of keeping financial processes streamlined is having a plan, even if it focuses more on the future rather than the near-term. TD Bank’s Small Business survey found that 59% of small business owners do not have a retirement/business succession plan in place. Owners should consider working with a banker or financial professional to establish a comprehensive retirement or succession plan to set their business — and themselves — up for long-term financial success. Once you have a plan in place, you can continue to focus on making their businesses successful in the present.
2. Keep Your Finances Organized
Ben Kurland, Co-Founder, BillFixers
The most important element of keeping your finances streamlined is actually having them organized. Most startups end up with services and expenses that you don’t actually need or that you’re way overpaying for because growth is the priority. A startup will need a solution to a problem fast, so they’ll sign up for a monthly SaaS product. But then six months down the line it’s completely irrelevant to your processes, but you’re still paying for it. You can monitor your subscriptions using Divvy, QuickBooks, or a subscription tracking tool. Once you know what your costs are, you can get to work either canceling unnecessary ones or negotiating them down.
3. Know the Importance of Scheduling Tasks
Kurt Rathmann, CEO & Founder, ScaleFactor
Delegating daily tasks will create a visible schedule for small business owners to stick to, so they don’t lose track of their financial goals. For example, Mondays can be spent checking cash positions, Tuesdays can be spent reviewing and scheduling unpaid bills, Wednesdays can be spent reviewing and sending invoices, and so on. This will make accounting more organized and streamlined for business owners so that there is more time that can be focused on their business’s bottom line and less on financial stresses.
4. Automate Reminders & Recurring Billing
Rachel Cottam, Marketing Manager, ZipBooks
Use automated late payment reminders so clients don’t go too far from the due date and forget about the purchase. Follow up the day after payment is due and schedule additional reminders as well. If you have customers who make the same purchase every month, don’t waste your time rewriting the same invoice. Set up recurring invoicing with secure storage of credit card information and automatic payment. Then send automated receipts once the invoice has been fulfilled.
5. Look for Double-Wins
Jared King, Co-founder & CEO, Invoiced
When we think about streamlining, we tend to focus on gaining efficiency. But sometimes, streamlining financial operations can also improve performance, not only bring greater efficiency. For example, in accounts receivable, many companies end up automating their billing and collections process and seeing huge time savings, up to 95% in some cases. But as a result, they also shorten the time it takes to get paid. For many businesses a key metric for collections is Days Sales Outstanding (aka DSO). This is an important cash flow performance metric for companies both big and small. So when you can find streamlining solutions and efficiencies that not only save time but also improve key performance measures, you’re winning two ways.
6. Immediately Invoice Your Sold Products/Services
James Stefurak, CFA, Founder, The Invoice Factoring Guide
If you recently sold a product or render a service and you had to wait for your client’s payment, it’s best to send them an invoice immediately to get paid faster. It’s natural to wait a little bit after services have been rendered, and some people think invoicing immediately may seem pushy. But it isn’t — in fact, it’s an effective way to streamline your accounts receivable.
7. Use Solutions Like Credit-as-a-Service
Brandon Spear, President, MSTS
SMBs need to take advantage of solutions like Credit as a Service to optimize their time and money. This solution can issue credit lines in less than a minute, automate the customer onboarding process, and apply unique B2B customer invoicing, accounts payable and payment term requirements. This provides customers flexibility and an enhanced experience. CaaS will streamline back-office processes for SMBs and help them grow faster too.
8. Keep Personal & Business Expenses Separate
Ryan Vet, Entrepreneur & Business Consultant, RyanVet.com
One of the most common mistakes many startups make when first getting off the ground is a failure to distinguish personal expenses from business expenses. In those early days, it is easy to plow forward without taking the time to properly document all expenses and receipts. Putting excellent financial controls in place from day one will make your life exponentially easier.
9. Project Cash Flow Reserves Conservatively
Jason Patel, Founder, Transizion
Always monitor cash flow and project your cash flow reserves conservatively. This allows you to act prudently, because your modus operandi is to be careful in the way you spend and monitor your business’ financial situation. Just because you have $10,000 in the bank doesn’t mean you’re going to have it next month — emergencies will arise, and it’ll be your job to empty your business bank account to save the company. Put aside money, and seek to grow what you have, since staying stagnant should never be an option.
10. Manage Your Cash Flow Properly
Matt Osborn, Director of Marketing, Apruve
The second largest reason small businesses fail is due to poor cash flow management. Although from the surface, it is a pretty simple concept (i.e., what comes into the business should equal or exceed what goes out) businesses cannot always control when their customers pay, but they can use technologies and processes to minimize errors. Technologies like databases, receivable insurance, invoicing automation, and buyer financing can help mitigate the frequency of slow or default payments from their customers. This helps make businesses run into far fewer cash flow concerns.
11. Use an Expense Management App
Rodger Roeser, CEO, The Eisen Agency
Use an expense management app (such as Itemize) that allows you to record, track and manage all the disparate expenses involved in running and starting a business. After all, early on especially, you need to know where every penny is going. This virtually eliminates human error, waste of time and money, and most of all, fraudulent transactions.
12. Use the Appropriate Business Structure
Marguerita Cheng, Chief Executive Officer, Blue Ocean Global Wealth
Make sure you have the most appropriate legal structure for your business. The most appropriate legal structure is important because you want to ensure that you establish a compliant system for handling tax payments. Also, make sure that you keep your business and personal finances separate.
13. Create Shareable Checklists
Joshua L Goldstein, Esq., Founder, Law Offices of Joshua Goldstein
Organize your payroll, HR, bookkeeping, accounting, and other financial processes using shareable checklists. With a checklist that each member of your team can see, you will be able to tell the steps involved, what’s been done already, and what needs to be done. With shareable checklists, it’s easier to get organized and avoid overlooking steps. Checklists create a systematic workflow, which makes your repeated tasks so much easier. Start by breaking down a financial process into a series of specific steps. Once you’ve done that, you’ve created a checklist showing what needs to be done. Share the checklist with your internal team so you can mark the progress as the work is complete. With the checklist in place, you’re financial processes workload will be done more consistently and correctly.
14. Utilize Accounting Software
Faith Kubicki, Content Marketing Manager, IntelliChief
Automation is one of the most effective ways for companies to spend less time and money on accounting administration. Especially in small accounting departments, where a few employees have to complete all the work, automation can take care of the most time-consuming tasks behind the scenes. For instance, software can:
- Match invoices to purchase orders
- Complete basic unit of measure and currency conversions
- Electronically send data, such as invoice amounts, payment terms, and remittance instructions, to a company’s accounting system
- Communicate with that accounting system to create payment vouchers and schedule check runs
When employees don’t have to handle these tasks by hand, they can focus on more important tasks — like exception handling and vendor negotiations. We’ve seen companies reduce their invoice processing time by up to 70%, and capture 90% (or more) of the early payment discounts that they were previously missing out on.
15. Create a Clear & Consistent Credit Approval Process
Jared Weitz, CEO & Founder, United Capital Source Inc
When you extend lines of credit within accounts receivable be sure to establish clear instructions around how to evaluate credit limits and at what point accounts are to be put on hold. Conduct regular review of credit approval. Circumstances are often able to change, and it is your responsibility to stay on top of accounts within your system. Establish an automated billing system. Use technology to your advantage here to reduce headcount and time spent managing billing cycles. This also includes invoicing and ensuring adequate pricing and units of measure for parts purchased. As much as possible, bill electronically. This also streamlines and reduces the manpower and potential for error.
16. Automate Accounts Receivables With Outsourcing
Alexandra Zelenko, Marketing & Technical Writer, DDI Development
As a business owner, you definitely know that automation can easily streamline your finances, saving you both time and money. That’s why if your business receives a high volume of customer payments, you should think of automating the management of receivables. An outsourced collections party can direct and receive customer payments, process them with both electronic and paper remittances, deposit the funds directly into your banking account, increasing your staff’s productivity by automating a manual and time-consuming processes.
17. Work With a Bookkeeper and Accountant
Kosei Okubo, CEO, Founder’s Guide
Hire a professional bookkeeper or accountant to maintain your business’s ongoing financial transactions and tax filing. This can give you more time to manage your business’s operations and growth. After all, it would be easier to manage your business’s finances if you have professional help.
18. Use a POS System
According to Ameris Bank, using a point-of-sale system (POS) allows you to easily accept customer payments and integrate payment transactions into your accounting platform. There are POS systems that feature a customer relationship management platform, which lets you track customer loyalty and rewards, as well as your inventory.
Journal of Accountancy suggests that the same list of accounts that make up the general ledger of the company shall be used for every division, business unit, and subsidiary. The company should issue standard guidelines by which to code transactions. This helps ensure a more accurate finance reporting and streamline the financial processes.
The Muse suggests that businesses should prepare for tax season early on by creating a separate tax savings account. This will allow you to cover your tax expenses. Work with your accountant to know your tax rate and make sure to save that percentage from every sale you make straight into your separate tax savings account.
Financially Simple recommends every business to develop a standard finance workflow system. If you have a process in place for how your business should handle bills received, collectibles, and other finance obligations, it will decrease the chance of making errors.
Starting and growing a business can be very challenging, especially with the many financial transactions you need to manage and keep track of. But with the help of modern technology, business financial processes become a lot more manageable. Be sure to consider the above financial streamlining tips from the pros to help you become more financially efficient in business.