Manage your finances

Manage your finances

Accounting for revenue and expenses can help keep your business sustainable. Ensure you have a basic knowledge of business finances and maintain proper bookkeeping.

 Looking closely at money-in and money-out can help your business run smoothly by maintain a sufficient cash balance. From development and operations to recurring and nonrecurring costs, it’s important to categorize expenses. Then, you can use a cost-benefit analysis, and assess revenues with the associated costs. 

Categorize expenses helps you make better decisions by putting cost reductions in context, which helps the process in weighing the strengths and weaknesses of a cost reductions.

Cost-benefit analysis (CBA)

A CBA is a technique for making financial decision in a relatively quick and easy way. It simply involves adding money in benefits over a specified time period, before subtracting costs from benefits to determine success in terms of dollars. This can come in handy when replacing equipment, hiring another employee or changing locations.

Know the different methods of accounting

Businesses often use either the accrual or cash methods of recording purchases. The accrual method puts transactions on the books immediately upon completing the sale. The cash method only records this once payment has been received.

For example, if you make a sale in January and receive the $100 payment in February, an accrual method would allow you to record income on January’s books. Alternatively, the cash method would require the income to land on February’s books.

The difference between these methods can be seen in your receivables report that comes with most accounting software. The uncollected balance owed from your customers is the invoiced amount that has not yet been paid. Balances owed show up as income when using the accrual method. However, balances owed do not show as income if you are using the cash method. This difference is very important to keep in mind when you are managing your cashflow.

Get accounting help

 You might want to get help with your accounting. Consider hiring a certified public accountant (CPA), Chartered Accountant (CA), or bookkeeper.

A CPA will typically cost more than online services, but can normally offer more tailored service for your specific business needs. A bookkeeper can provide basic day-to-day functions at a lower cost, but won’t possess the formal accounting education of a CPA or CA.