Client Line Home Page - Keeping Tabs on Your Business Finances

Knowing you have enough money in the bank to meet payroll is a start. But to accurately gauge your company's financial situation, you should have more information. Having simple systems in place that generate basic financial data -- and routinely reviewing the numbers -- can help you run the financial side of your small business effectively.

Nuts and Bolts
Key items you should be tracking on a regular basis include:

Cash position.
You'll want to keep enough cash on hand to pay current bills. Any excess cash can be invested for higher returns or reinvested in the business itself. A cash report that summarizes receipts, disbursements, and cash balances will show you where you stand.

Accounts receivable.
It's important to pay attention to outstanding accounts if your company bills customers for goods or services. Make it a routine to call or send a reminder as soon as an invoice is past due. If you follow up early, you should have a better chance of clearing up any problems and collecting the money your business is owed.

Accounts payable.
A listing of the amounts your company owes in due-date order can help you stay on top of bills. You can use this report in combination with the others listed above to get a fuller picture of your short-term financial situation.

Inventory.
Good inventory management practices will help ensure that your company doesn't miss sales opportunities, experience costly delays, or pay for storing more inventory than necessary. A good tracking system is essential if your business maintains inventories.

Analyze and Compare
Instead of waiting until the end of the year to prepare financial statements, you may find that quarterly or monthly statements better suit your information needs. Looking at historical trends can give you valuable perspective on the financial impact of business decisions, such as technology upgrades or adding or reducing staff. Industry benchmarking also can be a useful exercise. Benchmarking involves comparing your company's financial data with industry averages to help you make strategic decisions and identify potential areas for improvement.

Don't operate your business in the dark. Having accurate and timely financial information will help you make sound business decisions and better position your business for success.