At the start of this year, you'll be taking some good resolutions (lose weight, do sport, increase your energy...). That's all well and good, but there's one area you're missing in your life as a company director for which you never imagined you could make good resolutions for the New Year. It's true that this area doesn't sound very sexy, but it's very important to your development. In fact, if you neglect it, your business could quickly go under. I'm talking about the accounting. Accounting doesn't sell directly to your customers, it's a tedious business which often explains why it's neglected. It is no longer possible to suffer so much from the very idea of talking about accounting. To enable you to manage this subject without apprehension and to get this new year off to a good start, I propose 10 good resolutions that will enable you to change the way you look at this area. This will give you every chance of making a success of your «accounting» year.
1st resolution: good accounting organisation
You receive a stream of documents every day. They arrive either by mail, or by email. These include advertisements, technical documents, invoices, bank statements, legal documents and contracts. This list is not exhaustive, but it does illustrate the multitude of documents you have to manage. To avoid being buried under this flood of documents, you need to set up an administrative organisation to keep track of them. You separate documents with no accounting impact, such as advertisements and technical documents. You direct accounting documents for processing. By accounting documents, you mean :
- purchase invoices (for goods and raw materials)
- overheads (recurring telephone bills, rent, etc.)
- Expense claims for managers and employees (hotel expenses, mileage allowances....)
- Bank account statements (monthly statements, agios statements, bills of exchange statements, etc.)
- sales invoices (your invoices from your software or your invoicing system)
- your cash register
Visit centralising all the accounting documents mentioned, you reduce the chances of documents being lost. You can then account for the documents collected and sorted in this way. If you have a accounting firm to whom you outsource With this function, you can send all your centralised documents at regular intervals. You can reduce the number of requests for additional documents, which is time-consuming for both you and your practice.
2nd resolution: process accounting documents on a regular basis
There's nothing better than regularity in handling a repetitive task. The mechanics of processing accounting documents is to be put in place. This means setting in your schedule a daily working time on the collection accounting documents. As soon as’mail opening, a sorting will be made for classify incoming accounting documents in an «accounting» banner. They can be processed on a weekly or monthly basis. For documents sent by email, you can archive in a electronic file on receipt.
Regularity will prevent you from having an excessive and tedious workload. Breaking down work sessions will be a way of making the processing of accounting documents more fun. If you do your data entry in-house, keep regular records your movements. The right pace is at least once a week. If you have a accounting firm, If you're not sure, give them the documents at least once a month. They may not process it on a monthly basis, but you will have press release the documents and you will be freed from this task.
3rd resolution: regular billing
The sinews of war for businesses are the revenues. A strategy, a sales action and a marketing approach will generate sales. However, your procedures will ensure that you actually invoice for what you sell. I often come across discrepancies between my customers' sales and their invoices. Why is this? I see a lack of internal procedure. There are no checks to ensure that every sale shipped or service performed has been invoiced. This is a loss net sales. Time that was not paid off. From the treasury missing from your bank account. This will help you improve your finance by defining a new internal procedure for monitoring the billing. A cross-check between the removal of goods from stock and invoiced sales is one possibility. For services, a cross-check with timesheets could be another.
4th resolution: monitor customer collections
As I said, the revenues is essential to development of your company. Sales are defined as cashed. I often see our customers concentrating on selling at the highest possible price. But strangely enough cover of these receivables is not being followed. Trade receivables are piling up and no money is flowing into your bank account. Your treasury is approaching the critical threshold, and that's when you realise that your customers owe you money. You send out reminders by email, post and telephone. By the time your customer pays your invoices, you've lost precious days that can generate bank charges. Your working capital requirement will automatically increase. If you set up a regularity in monitoring your trade receivables (see point 1), you will have more cash and increase your chances of recovery. The older the debt, the more difficult it will be to recover. You increase your exposure to your customer's business failure. A sale is important, but the’collection of the claim is your priority. Companies with strong sales growth have gone bankrupt because they could not keep up with the increase in trade receivables. As no provision had been made for financing this, the lack of cash led to the company's failure.
5th resolution: invest to increase its profitability
Knowing how to invest at the right time is a quality you need to work on. A investment is always done with a view to benefiting from a advantage either monetary, or competitive. You don't invest in order to incur costs that will get in the way of tax savings. That makes no sense. You invest to earn more tomorrow. By investing at the right time, you are betting on the future.’future. The signals are positive and your risks are calculated. You are careful not to invest in outdated technology. You can also invest in people. For example, you want to increase your sales. By investing in a sales profile that you can train in your methods, you increase your chances of achieving your objectives.
6th resolution: safeguarding fixed assets
The company holds assets. Le equipment which is intended to exist over several financial years is called a fixed asset. Their unit value exceeds 500 euros excluding VAT. Each year, you must draw up a inventory to make sure they are existence and their good operation. Otherwise, the accounting treatment will generate a load. This inventory will be tedious to carry out if the equipment is spread over several sites or given to employees on the move. To make your work easier, I encourage you to follow as soon as they are acquired. You must be able to track. In this way you avoid disappearance. You follow his maintenance vehicles, computers, etc.). These often high-value assets will be saved. Your company will not lose these values. By designating managers of these fixed assets, you raise awareness your team about the importance of monitoring equipment. You save money on renewals, which will be fewer in number. Your employees will be working with equipment that will produce productivity gains.
7th resolution: manage stock more accurately
Le stock is synonymous with cash and cash equivalents. Stock and fixed assets are often significant in companies trading in goods and raw materials. It is essential to keep a close eye on rotation. For example, if your stock is not well organised or referenced, you risk missing a sale. You didn't find the goods you wanted to sell, even though they were in the warehouse and your customer was standing at the counter hoping to take them away. Another example: you buy a stock of A-goods thinking you have none left. However, your stock management software shows that there are some units in stock. As this reference is not well organised and you can't find the units, you decide to restock. Your treasury will be reduced by this second purchase and, more importantly, your initial stock units will not have been sold.
If you want to earn money, start by making sure organise, ranger and inventory your stocks. Make sure that the highest values are in security and run no risk of being flights. The quality of conservation is important. For example, stock that is sensitive to heat should be stored in a cool, dry place. Any disappearance stock or deterioration results in loss for the company.
8th resolution: monitor your cash flow
The most important thing, after sales, is to have a good reputation. sufficient cash. The principle is simple. With a positive cash flow, you will be free to choose your decisions. The more treasury and the more you'll be asked to borrow with your bank. Your cash position will absorb your working capital requirement. This variation comes from the difference between the collection of trade receivables and the value of your stock, from which you deduct the amount of your supplier, tax and social security debts. If your sales increase while your payment deadline is still 45 days, you have an increase in your trade receivables that needs to be financed. Your suppliers may not be willing to wait for their invoices to be paid. Having a regular monitoring between your cash receipts and disbursements will help you to assess your future cash flow difficulties. You relaunch your unwelcome customers. You remember the cheques before sending them to the supplier. To do this, you can use a spreadsheet and indicate a block for receipts and another for disbursements. The difference between the two expresses the monthly balance. After adding the balance carried over from the previous month to the balance for the current month, you obtain the new balance theoretical cash balance at the end of the month. Any value negative will be on the lookout for a solution with your banker.
Cash flow should be monitored at least once a week if you have cash flow. If cash flow is tight, a weekly review is recommended to improve responsiveness. Finally, for structures with little movement, monthly monitoring is sufficient.
9th resolution:using your equity capital wisely
You have hired capital to get your business off the ground. Your results The profits and losses of previous years have increased or reduced this initial capital. Your business works, because you use this initial capital and your reserves. We call them shareholders' equity. They belong to the company for as long as the associates have not decided to distribute them. It is therefore resource which you will use to grow your business. Every euro of equity must generate a profitability. Otherwise, you're hoarding and losing value because your money isn't earning anything. The risk is that you will accumulate equity and no longer take the risks you need to. develop its business. You stop investing. In the end, you will destroy value just when you thought you were creating it. Being cautious is wise advice. Nevertheless, you should make sure that you deploy the strategy that you have prepared, even if it means using cash from your own capital. Failing that, you can distribute them to your partners, who I have no doubt will reinvest them in projects that will create profitability.
10th resolution:monitor your debt
The level of your debts will give you the’financial autonomy. If your debts to suppliers, the government (tax and social security debts) and your bank (loans, bank overdrafts) are too large, you will no longer be able to apply your strategy. You'll lose a lot of time managing supplier and government reminders. The legal machinery will also be costly. You watch your debt so that you don't find yourself in this situation. Visit financial leverage particularly those linked to bank debt, are a good thing. Your business must be solid enough to ensure repayment. Regular monitoring will help you to ensure that debt and equity are well matched. If your debt exceeds one times your equity, you run the risk of failure. In the same way that you monitor your trade receivables and inventories, you can keep your debt under control.
A good organisation and a regular work will be good practice to be put in place at the start of this NEW YEAR. You'll get into the habit of monitoring your assets (fixed assets, stocks, receivables and cash) and managing your liabilities (equity and debt). The implementation of’reporting tool of your performance will help you keep track of your management. Your management is the fruit of your actions. Poorly organised accounting will have a negative impact on your company's results. You can easily understand that if your company does not invoice all its services or if receivables are not collected, your cash flow will suffer.
I've drawn up this list of 10 good resolutions to help you succeed in your accounting year. I encourage you to follow them now.
Novalliance chartered accountants is at your disposal to help you organise your accounting function more effectively. Novalliance chartered accountancy's mission is to calculate and help you develop your performance.
