The last thing entrepreneurs want is for their hard-earned dollars to go down the drain because of a money leak in their business. Since so many entrepreneurs are working harder than ever before earning their living, it just makes sense to shore up every profit leak possible. But you might not know where they are or what to look for. That’s where we can help.
KRD accountants can help you identify areas in your business where you might be able to plug some profit leaks and keep more of the cash you are making. Some ideas may be familiar to you, and some may be new.
It’s not enough to simply know that these tips are good ideas. The real wealth is in taking action and implementing these ideas.
Here are the 10 biggest money leaks in your accounting system.
1. Not Having a Daily Cash/Revenue Report
2. Billing Too Slowly
You’re not a bank! The sooner you bill, the sooner you’ll get paid. Even better, rearrange your terms so that you receive a retainer or deposit before work is started.
3. Not Being Caught Up On Your Reconciliations
Only a reconciliation will catch big bank errors like a deposit that has failed to be posted to your account. If your reconciliations are not completed accurately, you could be losing thousands of dollars in errors not caught.
4. Not Doing All the Reconciliations in Your Business
Consider the following: inventory, accounts receivable, the cash drawer, merchant accounts, PayPal, your shopping cart, petty cash, accounts payable, credit card accounts, vendor statements, bank loans, mortgages or leases, equity accounts, prepaid and deferred accounts, and fixed assets, just to name a few of the most common ones.
Make sure you have internal controls in place to reconcile all of the accounts you need to in your business.
5. Doing Double Work
6. Not Benefiting from Time Tracking
7. Not Measuring Job or Customer Profitability
There’s huge power in knowing these detailed profit numbers, because then you can go after jobs, customers, and projects that are more profitable and avoid the ones that are less profitable.
8. Not Understanding Good Debt and Bad Debt
Good debt is debt that can help you grow your business. Good debt includes items such as mortgages and building leases, college loans and other education to improve your skills, and automobile loans and other loans made to purchase equipment and other assets that will hold their value over time.
Take a look at which kind of debt appears on your balance sheet, and take steps to reduce the bad debt. Good debt planning will help you stay solvent and keep you afloat in both good and bad times.
9. Poor or Nonexistent Recordkeeping
Poor money habits add up to higher bookkeeping expenses, especially at tax time. The good news is there are easy fixes for most issues once you put some new habits in place.
10. Not Being Willing to Make Changes To Your Accounting System
Most clients procrastinate making changes to the accounting system until the system is in chaos or is costing them an arm and a leg. Of course, it’s your business and you know your priorities better than anyone. Just be sure fear is not getting in the way of good priority-setting in your business.
The good news is, once you’ve made the changes, the savings can be huge and the relief in stress that you feel is priceless. When you can move from reactive to proactive in any area of your business, you and your business benefit.
KRD Accountants Can Identity and Prevent Money Leaks
When you can overcome these ten money leaks, your business accounting system will transform from a compliance headache to a powerful and effective tool to help you run your business better.
Call KRD at 847-240-1040 or fill out our contact form today to schedule your free initial consultation.