When you think of spring cleaning, you may picture dusting shelves, rearranging furniture, or downsizing your wardrobe. However, it’s not always about sprucing up your home. Spring cleaning can be a great opportunity to tidy up your small business finances, so your organization can continue to grow and thrive. Consider these tips to help you organize your bookkeeping, payroll, and other business processes.
Keep Your Personal and Business Finances Separate
Spring is a good time to separate your personal and small business finances if you’re a new business owner. Keeping these expenses independent can provide a clearer picture of your organization’s cash flow and financial health apart from your personal assets and liabilities. Plus, separating personal and business expenses can streamline the tax deduction process and save you time and stress from an IRS audit.
One of the easiest ways to organize your personal and business expenses is by opening a business bank account. You’ll likely need your Employee Identification Number (EIN) to open this account. If you don’t have an EIN, you can easily apply for one on the IRS website. Additionally, you can get a credit card for your business account to help organize and streamline your expenses even more.
Review Your Payroll Process
If you have employees, you want to ensure they’re getting paid fairly and correctly. However, if you’re using a paycheck calculator to figure out their take-home pay, you could easily make errors that may result in fines or litigation. Plus, manually calculating paychecks takes a lot of time and effort you could spend on your business.
That’s why you should consider small business payroll software. With the right software, you can set up your payroll to run automatically, freeing up valuable time for your business. Many software programs can also calculate, file, and pay your federal and state payroll taxes for you, making tax season a breeze. Additionally, your employees can easily view pay stubs or change their payroll information through a user-friendly workforce portal.
Revisit Your Business Plan
A business plan is a crucial document that details how your business’s objectives and how you plan to achieve your goals. However, it’s often treated as something you put together once during the beginning stages of starting a business. Instead, a business plan should be a living document you revisit and update regularly because it can serve as a roadmap to your entire business lifecycle.
Spring is a great time to quickly check your business plan and adjust it according to your current business needs and goals. By periodically updating your business plan, you can properly allocate time, money, and resources to help achieve your objectives and goals. Plus, if you’re looking to get a loan, many lenders require a formal business plan before extending credit.
Perform a Financial Analysis
Taking a closer glance at your company expenditures and revenue over the previous year can help you determine where to cut back and possibly reallocate budgets to better serve your goals. Here are some steps you can take when performing a financial analysis.
Review Your Spending Habits
Spending too much on business lunches or office furniture? Small changes to your business spending habits can lead to significant savings over time. Additionally, look at your monthly bills and see if you can reduce costs by eliminating services or subscriptions you no longer require. You can also review insurance policies and determine if there are alternatives that meet your requirements at a lower price.
Evaluate Your Cash Flow
Cash flow is the net balance of cash moving in and out of your business over a period of time. If the cash flow is frequently low, form a strategy to enhance it. Some examples of enhancing cash flow can include:
- Reducing expenses
- Increasing sales
- Bargaining more extended payment periods with your suppliers
Check Your Debts
If your company has unpaid debts, evaluating the periods and interest rates is important. Look at your monetary statements and prioritize paying off lucrative debt or combining numerous debts into one loan with a reduced interest rate. Refinancing your debt could also be viable if you pay extra interest on loans and current rates are incredibly lower.
Evaluate Your Vendors or Suppliers
Vendors and suppliers can play key roles in your business, so you want to ensure you get the best contract possible when working with either of them. Review your existing contracts and determine if they reflect your current business needs. Don’t hesitate to bargain better duration or change to a more affordable option.
Review Your Pricing Strategy
As your company grows, so accomplish your expenses and costs. Take time to ensure you’re valuing your products or services correctly. Check your pricing method to see if you’re holding your margins, and then adjust accordingly if necessary.
Follow Up on Your Outstanding Invoices
Receiving timely payments is vital to your business’s financial health, so now is a good time to do an in-depth cleaning of accounts receivable. Pull up your due invoices, and then make a follow-up strategy to help you receive payment timely and keep your operations running. The easiest way to do this is by utilizing invoice software that creates payable invoices, sends automatic reminders to customers, and provides real-time tracking of your invoices.
Review Your Marketing Efforts
Marketing is vital to any business, helping communicate your product’s or service’s value to potential customers. Whether you’re focusing on social media, email, or another market strategy, take time to evaluate the progress of your marketing efforts. If you’re not seeing a positive return on your investment, consider allocating your funds elsewhere.