Statistics have shown that about fifty percent of small businesses will fail by year five because of a multitude of issues, many of them financial. How can you avoid having this happen to your small business? Know the indicators that signal that there could be trouble. Here are some of the more common financial problems that small businesses face, as well as possible remedies.
Your business’s revenue stream needs to be appropriately tracked to gain insight into profitability versus cash. Things that improve cash flow are collections processes, management reports, and automated billing. Many small businesses fail because they simply underprice their products, and you should know the actual costs of producing goods and services. Successfully tracking labor and material costs will increase your chances of accurately pricing goods and services, thus putting you on the right track for improved cash flow management.
For most small businesses, payroll is the most significant expense. Small business owners have the responsibility to set-up and maintain payroll, make timely payroll deposits, and properly retain personnel and financial records. There can be stiff penalties if any of these steps are not done accurately and in a timely manner. Therefore, it is highly recommended to use a reputable payroll service to facilitate your payroll and give you peace of mind about the process of managing payroll.
It’s inevitable. No matter what systems you put in place to avoid it, there will be customers who fall into the area of collections. First, know your rights. Your state’s website is an excellent place to start. Stay ahead of delinquencies by letting your customers know, in writing, your terms of payment. If your business extends credit, request a credit report from your customer. Avoid harassment and document everything (in case you must go to court.) Be willing to settle, which may be more financially feasible than going to court. If all else fails, hire a collection agency.
Contact Bowman & Company Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services are aimed at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.