For most business owners, getting paid quickly is critical. It can also be extremely difficult. We have all experienced the frustration of investing time, energy and funds into a client job only to be left spending more time which is your margin following up on collections!
A couple of years ago, I was retained to help a struggling business regain its profitability. After six days, I told the CEO that the problem was not sales-related. The problem was too much overhead and debt. The CEO disagreed with my assessment – and to my great relief my contract was quietly terminated. The company went out of business eight months later.
Running a debt-free business is probably contrary to everything that you have ever learned. And you might wonder why you should do it.
From running payroll to tracking down receivables and calculating the value of inventory, ask any small business owner about bookkeeping and you’ll probably hear plenty of complaints. Learning basic accounting best practices is a great way to keep your books ready for potential investors and the IRS, if they should ever come calling.
Here’s what you need to know about bookkeep
Money owing from customers in the form of accounts receivable is one of the biggest contributors to your company’s cash flow. While business success hinges on having positive cash flow activity, the money that flows into your business can’t really be counted as income until it becomes cash-in-hand.
No company can continue to operate if it consistently pays out more than it takes in, and it’s the ability to generate and use cash that allows your business to: