Accounting for Every Penny
Are you looking for ways to improve your bottom line, but not sure where to begin? An easy place to start is by accounting for every penny that your business receives or spends.
It may sound like a burden, but it’s worthwhile. In fact, accounting for every penny is a great first step to improving your financial outlook. It’s hard to make changes to something if you’re not tracking it. Accounting for every penny will show you all the ways your business is spending cash.
Once you have an accurate picture of your finances, you can start making some changes. Keep reading to learn about some of the benefits of accounting for every penny and how to get started!
Maximize Tax Deductions
When you’re keeping track of every penny coming in to or leaving the business, you have a better chance of finding more ways to save on your taxes. Plus, you’ll have everything categorized so it’s easier to navigate come tax season.
Tax deductions come in all forms and you could be missing out on some of them simply because you’re not accounting for everything that your business spends.
Waste is a business’s worst enemy. There are teams of employees at larger organizations dedicated to reducing waste. Tracking every penny can open your eyes to how much your organization may be wasting money on unnecessary expenses.
This may come in the form of excessive inventory, unnecessary subscriptions, or contracts that are no longer being used.
Great businesses live and breathe by their budgets. Unfortunately, outside circumstances sometimes cause us to tap into extra resources and cover unforeseen expenses. The question is how to stay on budget when those things happen.
If you’re tracking every penny, you’ll have an accurate picture of what is really happening in your budget. Instead of being surprised each time some new expense comes up, you can decide to put it in your budget for the next period. Then, you’ll be better prepared if it comes up again.
Accounting for every penny gives you a better look at your company’s financial picture. You’ll be able to see every bit of money flowing through the business and where it’s being used. The increase in visibility allows you to make better business decisions and identify concerns before they become problems.
If you don’t like the way your numbers are adding up, you can start making changes in the business. Then, you can track the changes each month to make sure there’s an improvement.
More Accurate Reporting
Along with having better visibility into your cash flow, accounting for every penny will give you the most accurate reports possible. Better reporting helps you make better decisions for the future. You’ll have a better handle on which business segments may be holding back the company’s growth. Then, you can investigate why that is and create a plan of action to overcome it.
Accurate reporting can also help you secure more funding and better interest rates. Third parties, such as lenders, like to see how your business is performing before deciding whether to extend a new line of credit. Accounting for every penny helps you look professional and trustworthy.
Detect Fraud Earlier
Accounting for every penny is a great way to prevent fraud and detect it sooner. With the full financial picture at your fingertips at any time, you’ll have a better chance of noticing trends. Then, if something ever appears incorrect or “off” in some way, you can start to investigate.
Having every penny accounted for can actually save you time and money by helping you flag fraudulent activity as soon as it starts. Detecting fraud after it’s been happening for a long time means that your business has already lost a ton of money, which is difficult to recover.
How to Account for Every Penny
You know that accounting for every penny can help your business finances. With all the benefits waiting for you, where do you start?
Commit to Change
As with any new procedure, the first step is to make the commitment. Decide that your business is going to track all cash flow in and out of the business, no matter what it takes. Make sure that part of this commitment involves communicating the change to your accounting team.
Dedicate the Time and Resources
The next step is to make a plan and dedicate the appropriate time and resources. When you’re accounting for every penny, it may take extra hours from your accounting staff, or yourself if you’re not large enough to have an accounting staff yet.
Be clear on the expectations upfront and make sure the person responsible understands why you’re asking for every penny to be tracked. Then, make sure they have everything they need in order to get the job done.
It may be a good opportunity to upgrade your accounting software, for example. Think of it as a whole accounting makeover and treat yourself to some incredible reporting features while you’re at it.
“No Stone Left Unturned”
When you’re accounting for every penny, it means leaving no stone unturned. You’ll be logging every invoice and receipt. It can feel like a huge change if you’ve historically been leaving certain information out of your books. However, with the increased visibility and all the insights you’ll gain, the benefits far outweigh the time spent. Tracking your business finances in this much detail will help you identify ways to improve your bottom line and create a profitable business.