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Identifying and Addressing Common Small Business Account Challenges

When launching your business your focus was likely on the product and service you were bringing to the market. The reality sets in as owning and operating a business involves far more than simply sales and marketing. For many business owners mastering the accounting aspects of business ownership prove to be the biggest challenge they face. Considering the impact finances have on every aspect of the business, identifying and overcoming these types of challenges can often be the difference between the best year ever or having to scale back operations.

We reached out to experts across the country asking them to provide our readers with the most common challenges business owners face when handling their accounting. In addition, many were able to provide tips and advice on how businesses can overcome these challenges to place their business on firmer financial footing.

Courtney Barbee, Owner and COO at The Bookkeeper, a CFO consulting and bookkeeping company, says after worked with literally hundreds of small businesses, and there are a few “pain points” they see often that owners should be aware of:

Cash flow management. Many of our clients come to us with accrual-basis financials, but poor cash-basis ones. This is often due to lenient A/R practices combined with paying every bill as soon as it comes through.

Poor cash controls. Often, petty cash (or in the case of retail, the tills) have never been reconciled, and no one realizes how much little cash purchases, such as ordering lunch for the staff, are adding up.

Failure to accurately amortize debts or depreciate assets. Small business owners miss out on a lot of tax deductions by failing to properly record interest expense or depreciation expense.

Non-compliance with FLSA. Too often, owners improperly classify their workers to avoid employment taxes, and get themselves into compliance trouble.

Late or missing 1099s. Small business owners often wait too long to start this process, or fail to collect W-9s from vendors, resulting in non-compliance and hefty fines.

Linda Herron, the CEO of SimpliProfit an accounting/bookkeeping, advisory services and business consulting company, says understanding cash flow is something she sees small business owners struggle with often.

“The number one challenge for small businesses is to understand their cash flow. I have worked with many small business owners chasing cash to cover their payroll each month. To overcome this challenge the small business owners should hire an outsourced CFO/Controller to get the business back on track and running smoothly. The CFO will review and may tweak many workflows to get a positive impact to your cash flow.”

Her Steps to Overcome

Understand your breakeven point will have you knowing the target cash amount to collect each month (cash inflows).

Review the accounts receivable weekly and collect anything overdue.

Modify payment terms where you can to collect cash sooner.

Invoice when services are earned, or products are sold. Don’t delay invoicing because that will delay your cash inflows.

Streamline the billing process by utilizing bill.com to cut down the time to get cash to your bank.

“These minor tweaks to a small business can improve the health of the business quickly and have the small business owner sleeping through the night,” says Linda.

LaKesha Womack, founder of Womack Consulting Group, works with clients across a variety of industries to help them strategize and achieve their business goals. She is also an official member of the Forbes Coaches Council. She says the challenge lies in what business owners aren’t prepared for that can present difficulties down the road. Here is her rundown of challenges and how to address them:

Not knowing their numbers. Many business owners are consumed with the day to day operations of their business and don’t always track their numbers which can affect their profitability and decision making. Taking at least one hour per week to set goals and track progress from the previous week will ensure the business owner is able to make adjustments that will lead to profitability.

Not being prepared to file quarterly taxes. Quarterly tax deadlines seem to come quickly and often cause business owners to miss the important dates. Setting alerts on your calendar for two weeks prior to the deadline can provide ample time to collect the appropriate paperwork for filing.

Not being prepared to meet with their accountant. Many business owners are not aware of what they need to bring to their meeting with an accountant, so they either don’t bring enough information, or they bring too much. When scheduling a meeting, make sure you ask the accountant what documentation you need to bring and write a checklist to ensure you are prepared.

Making emotion-based decisions. When business owners do not track their financial data, they are more likely to make emotion-based instead of fact-based decisions. Business decisions should be made based on the anticipated return on investment more than how much you like an idea or how you feel about it.

Not paying the appropriate payroll taxes. This can easily be solved by using a software program that calculates your payroll taxes and automatically files them.

The Take away: Setup your Accounting Software for Success

Most small business owners start off setting up their accounting software themselves to save money. In the long run, this may cause you more issues. The cost to fix and streamline your accounting processes after the fact will be expensive. To overcome this challenge, hire an Accountant who will set up your software with the future in mind (scalable). You will want your software to be flexible, scalable and report, so you can understand your financial statements at the end of the month.

Each business owner deals with their own set of challenges, and we know cash flow and obtaining working capital is among them. If you’re looking for a flexible and easy way to get cash flow for your business without the hassle, we are the perfect business partner for you. Want more information? Call us at 1-877‑850‑0998 to  get started today.

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