Hello! my name is Harry and this is my accountancy blog. It is my mission to use this blog to educate others about the benefits of hiring an accountant. I hired an accountant last year and doing so has brought many positives to my life. I now find it much easier to run my business and to manage my tax returns at the end of each financial year. I hope that by reading the articles I have posted here, you will gain a good understanding of how an accountant can help you. Thank you for stopping by and checking out my blog.
If you run a small business that is doing rather well, you may be quite pleased with its progress. Yet even if you and your staff are working as hard as possible, you might keep running into issues with your bank account. How is this possible?
It's All Greek
For many small business owners, accounting terminology may be like a different language. They may understand the concept of sales and expenditure but are not particularly good at anything else. You might be having issues with your cash flow, and these figures are not directly comparable with sales and expenditure. Even though you may be signing new contracts and issuing associated invoices, the money is not coming in as it should be.
Upside Down Cash Flow
Your business may have a payment policy in place that is based on a 30-day turnaround. In other words, you expect all your customers to send you a cheque before the 30-day window is u,p but how good are you at chasing this? If you let it slide and some or even many of your customers take advantage of this, then your cash flow situation is going to be upside down. After all, your regular expenses will still be due, and you will be expected to pay them no matter how much money is coming into the bank.
Understanding Debtor Days
To start fixing this problem, you will need to understand another accounting term, debtor days. This refers to the number of days that it takes your customers to pay their bill, and you can break this down by individual client.
If you find that these numbers are significantly higher than 30, you need to tighten things up. To begin with, send a gentle reminder to those customers as they may simply have overlooked the situation. At the same time, make sure that you have someone on your staff to chase any outstanding invoices once they pass that magic number.
Get into the habit of checking your debtor days report and, hopefully, the figure should start to creep downwards from now on. As it does so, you'll find fewer problems with your cash flow and may not need to worry as much when those big bills come in.
If you've left a lot of this accounting work to chance in the past or if you don't even know how to generate a debtor days report, you need to bring in a bookkeeping service. Your investment will pay off handsomely when you start to run a tighter financial ship and master that cash flow.Share
27 December 2019