Building a business includes more than just picking a location, developing a business plan, building a website or picking your social media platform. Some of you may be asking what could be more important. Well, I'm here to tell you that opening a business bank account should be on your top 5 of "things to do" list. Having a business checking account can help you deal with tax, legal and practical issues. Many business owners choose to manage their business and personal finances within the same bank account for the purpose of convenience and but fail to realize the advantages that come with managing a separate business account.
A major reason that companies use bank accounts is for internal control. Here are a couple of the control advantages of using bank accounts:
Keep in mind, the Internal Revenue Service (IRS) is really picky about business owners being able to show that their business is really a business and not a hobby. Basically, you have to show a profit on Federal Tax Form Schedule C three years out of every five. Having a separate business bank account established further proves you are a business and not a hobby business.
As your business grows, it becomes critical to build a proper legal and financial foundation. Opening a separate bank account is one small step in that direction, and will help keep your accounting records organized.
It’s not every day entrepreneurs think about the accounting processes within their business. Accounting is not all about just collecting revenue but more so about the steps it takes to ensure the process to collect money does exist and is clear to the leaders and staff.
There are no shortages of details to consider when you’re a small business owner. Getting the back-office basics of accounting in order can make or break a business as it exist in any phase -- start-up, growth or expansion. Let's think about it, fees alone can be “atrocious” thus many experts recommend using an accounting software that will capture all accounting aspects of the business. It is important to pick a software that will suit your business needs not those of a colleague or friend. I say this because what is good for one business owner may not be good for another.
However, if you are a business that cannot afford the cost of an accounting software and would rather maintain control in Excel worksheets then it's highly recommended a procedure guide is developed. The guide will provide direction and transparency to an important process within your business.
Get your small business in order by starting with these accounting tips:
1. One of the obvious and repeated suggestions is separating business and personal expenses. When it’s time to tally up deductible expenses, you want to be ready. Start today!
2. Understand when it’s time to pay for support. Choosing to hire a consultant or outsource a part of your business process can make a big difference. Not only do you get some of your time back to use on bigger projects you are also investing someone who speaks the professional language in those specific areas.
3. Dedicate time to update your records. Many business owners may choose not to hire a professional consultant to support with updating their accounting records or performing data entry. However, this decision can make a difference in the business.
4. Follow Up on Invoices and Receivables. Many business owners still invoice their customers and wait for payment. It will be key to plan for necessary follow-up calls to ensure the expected revenue remains consistent as budgeted.
These accounting tips are all great ways to make small changes. In the beginning, it probably is not necessary to hire an account full-time. The best way to manage in the beginning is by outsourcing the accounting services which enables you to pay only for the exact accounting support your startup needs.
Remember that proper, responsible time management of any task, especially accounting, is key. Fontenot & Associates Solutions LLC, specializes in accounting and operations services because we understand and recognize the importance of accounting processes and strive to be a part of the solution to building successful businesses, one at a time.
As a business owner, have you ever felt left out of a conversation when others start to talk about their financial statement reports? When you start to hear words such as, P&L, profit and loss, statement of earnings or income statement --- the conversation may start to feel a bit awkward and overwhelming. That’s why we’re going to dive into how to understand more these statements.
Understanding the income statement is essential to business owners and investors as it provides an overview of the profitability and future growth of your business. All business owners should see the income statement as a simple and straight forward report on a business’s cash generating ability. It is a scoreboard on the financial performance of your business that reflects when sales are made and expenses are incurred.
The official definition says an income statement is:
A financial statement generated monthly and/or annually that reports the earnings of a company by stating all relevant revenues (or gross income) and expenses in order to calculate net income. Also referred to as a profit and lost statement.
The income statement is one of the five financial statements issued by a business. It reports the amount a corporation has earned during the period between two balance sheet dates.
Here are 3 things you should know about an income statement:
Income Statements come with Accounting Jargon
One thing that can make entrepreneurs shy away from financial statement conversations is the jargon used. The jargon can make it seem more complex than it really is. For example, the term “sales” or “income” might be used instead of revenue. “Expenses” and “costs” are also used interchangeably. “Profit” is sometimes called “net income.
Income Statements cover a period of time
The income statement reveals how much money your business made over a period of time. Most often, the statement will reflect the performance over a month, a quarter or a year.
For example, you might hear the words, year to date, or see “Y-T-D December 31”, indicating the period for Jan 1 to Dec 31.
Income Statement follows a formula
Every income statement, no matter how complex, follows a very simple formula.
Revenue – Expenses = Profit
For the period specified on the income statement, it will show the revenue the business earned, the expenses it incurred and the profit it made.
If you want to understand how your business operations flows, the income statement can help give you a better picture of what makes your company profitable and where the losses are coming from.
Acquiring new customers is expensive and time-consuming. As a matter of fact, research shows that attracting new customers is 5X more expensive than keeping your existing customers. One of the most effective ways to increase your revenue is to invest more time with your existing customers.
In the early stages of building your business, you use marketing to attract new customers. Once you land a steady flow of customers, your work has just begun. As a small business owner, you need to keep customers coming back. This is why marketing to existing customers is essential for your small business.
Don’t let customer relationships fizzle out after the first sale. We have identified four methods you can use to invest more into your existing customers and to help keep them coming back.
Tip 1: Stay in Contact
Most of the time, your customers are not at your business. It’s important to stay visible by building brand awareness and marketing when you customers are not around.
Tip 2: Address customer needs
When you operate as a small business, you have an advantage over the larger corporations by offering a personal experience. What problems can your business solve for existing customers?
Find out what the customer expects as soon as possible. Ask open-ended questions during your earliest conversations and listen to understand customer perception. Open-ended questions are those that require something more than just a simple "yes" or "no" in response.
Tip 3: Collect data
Data is gold when it comes to marketing to existing customers. You can use data to personalize marketing strategies for current customers.
Find out your customers’ opinions by collecting feedback. For example, you could send a follow up email to a customer to ask if they are satisfied with your product or service. Have a place where customers can submit feedback. Also, set up a process to let customers know how you fill use feedback.
Tip 4: Add Complementary Services to Existing Products
Adding complimentary services or products may help you gain new clients, as well as maintain existing ones. Review the products of your competitors for ideas.
Tip 5: Set up a loyalty program
A loyalty program rewards existing customers for returning to your business. Creating a loyalty program also connects customers to your business.
A loyalty program rewards customers for buying from your business. Set up a loyalty program for your business to encourage customers to keep coming back. Since they draw current customers back to your business, loyalty programs increase your revenue while rewarding customers.
These are just a few tips on how to get more revenue from your existing customers. By implementing these simple tips, you will soon see opportunities you can use to develop or enhance your customer service policies and procedures. The best part about reflecting on your existing processes, is that your customers will benefit and feel that they are appreciated.
Make this a focus of your marketing efforts and you will soon see the rewards come back in the form of increased referrals and increased sales.
My mission is to offer the best accounting and operations solutions and tips for entrepreneurs and small to mid-size companies worldwide seeking to close their process gaps with actual solutions.