If you’re a small business or even a consultant using ProProfs Project to handle your day-to-day project tasks, then there’s a very good chance you’ll be doing it to get paid. At some point, you’ll have to raise an invoice or you’ll have to pay a bill. Tight bookkeeping is essential from the minute you start trading.
This post isn’t anything to do with keeping your taxes up to date, and it’s nothing about regulation; I aim to offer no tips on those two subjects. It is, however, to do with making sure that if you’re in business today then you’ll be in business tomorrow and next year.
Doing the work you do is probably fun, raising the invoice probably gives you a rush and banking the check will make your latte froth over, but how about accounting for it. Are you properly recording when you send an invoice? Are you making a note when the money comes in? Do you know who owes you what from when?
These are big questions, and it can seriously affect your cash flow if you fail to keep on top of them so you should always keep good records. Don’t take my word for it, take it from my bookkeeper, Julie, who told me a sobering story.
A few years ago she was called into a business that was failing miserably. There was no money in the bank, and the tax bill was due. They simply couldn’t pay that and the wages. What to do? Julie was a friend on the owner, so she offered to pop in and help. She took a cursory look at the books and realised something was amiss. After a while, she offered to go through it all and take the books away.
Some days later she returned to announce that this guy, a small business with just one employee was owed over $60,000 from overdue invoices.
The owner simply hadn’t kept track of what was owed and more importantly, who owed it. Very quickly she arranged letters to go out to all the people who owed money and suddenly, checks arrived. More than enough to cover the tax bill and also enough to ensure they had a good Christmas this year.
It’s a simple tale, I know, but it just shows that a lack of very basic understanding of your ins and outs can mean the difference between going out of business and actually having surplus money in the bank. I’m sure many of us would prefer to have the latter!