Is your business financially viable? Last year was pretty daunting for the business industry. The global pandemic led to the temporary closure of several business operations and economic activities, drowning many companies in losses. As things have started getting better, entrepreneurs are ready to resume operations but this time, with greater expertise. Not only are they trying to compensate for past financial losses, but they want to create a sound financial management system.
Instead of hiring bookkeepers for maintaining records, take advantage of accounting automation. The modern-day applications and software synchronize data from business bank accounts and prepares journal entries automatically. For that, you have to improve internal operations. Likewise, you have to improve credit management to eliminate the risk of a liquidity crisis.
Apart from this, you can create an emergency fund to ensure cash availability in rough and challenging times. However, if you feel lost in financial management, let us show you the ropes. Here are six tips to upscale your accounting and finance operations.
1. Optimize Payroll Process
Undeniably, making payroll is a troublesome process for every business. At times, employees don’t get paid for overtime, while often, salaries get delayed. To avoid these problems, why not optimize the payroll process? Firstly, you have to select a payroll software with direct deposit. It will transfer every employee’s pay to their bank account while reducing the responsibilities on the accountant’s shoulders.
Well, accounting and financial management might look like the same thing, but that’s not true. Payroll processing is an accounting task but impacts business finances. With paper checks, employees deposit them at different times; meaning, you won’t get an accurate bank account balance. Thus, you must learn the difference between finance vs accounting to ensure you optimize the payroll efficiently.
2. Improve Credit Management
Truthfully, credit sales are commonplace in the business world. Most companies ship goods but receive payments months later. It might seem like a reasonable approach, but payment delays can lead to substantial financial losses. After all, businesses have to pay their creditors, suppliers and meet other financial obligations. Therefore, every entrepreneur must improve credit management. Before you sign a contract with any customer, check their credit history and market reputation.
Similarly, create terms and conditions in the business contract so that your client knows a definite repayment timeline. Moreover, you can install a reputable program that can make routine credit checks on the customers. It would also maintain order volume and put a hold on orders coming from customers with poor credit. You can propose advance payment schemes to eliminate the risk of bad debts and default for such customers.
3. Manage Cashflows
When it comes to upscaling financial operations, efficient cash flow management is the key. You have to closely monitor the business expenses and overhead costs to determine how much money goes out of the business. Likewise, you have to review the business reports and assess financial operations compared to the sales margin. It will unfold the company’s potential to generate cash, allowing you to reduce cash outflows.
Similarly, you have to evaluate the cash inflows. You have to see if the debtors – your customers are making payments timely or not. In addition, you have to ensure that a lot of cash isn’t tied up in the inventory since it can trigger cash flow problems. Having a balanced amount of inflows and outflows will keep the cash flow positive. Hence, making sure your company doesn’t suffer from liquidity or cash-related problems.
4. Integrate Blockchain Technology
The evolution of blockchain technology is likely to be a game-changer for the accounting and finance world. It is more of a decentralized ledger with a highly secure database. Hence, companies can store their confidential financial information on these servers. Besides this, blockchain enables smart contracts and verifies individual’s identities and credentials. Thus, you can check credentials before engaging in business with anyone, reducing the risk of losses.
Moreover, blockchain protects the transfer and ownership of assets. For instance, you transfer the assets to a trustee without complicated paperwork and documentation. In addition, blockchain facilitates foreign payments. The absence of a financial intermediary eliminates the service charges imposed on overseas transactions, enabling cross-border trade. This adoption of blockchain will benefit businesses by reducing costs and enhancing security. Also, it will increase traceability because the system is transparent.
5. Manage Inventory Smartly
Usually, managers have a habit of accumulating inventory to ensure orders don’t get delayed. However, if the merchandise doesn’t align with the demand, businesses will have to record losses. Likewise, many financial inefficiencies arise when there is a lack of inventory tracking across multiple channels. In addition to poor customer experience, it leads to lower sales. Therefore, you have to maintain accurate levels of inventory for financial stability.
Now, the question is how to manage inventory smartly? Well, business owners can invest in proficient inventory management systems. It will connect your in-store and online catalogs automatically. In addition, they will inform you when inventory is at the borderline, allowing you to restock beforehand. Precisely, these inventory management systems will help you stay one step ahead of the inventory levels.
6. Overcome Supply Chain Risks
In the retail industry, supply chain disruptions and volatilities can disrupt business operations. Therefore, business owners have to work closely with supplies and monitor demand to ensure the availability of raw materials. The main goal is to mitigate product access risks and fulfill consumers’ evolving demands, tastes, and preferences. For this, you can reevaluate the supply chain strategies and track existing contracts with suppliers.
Instead of breaking ties with the supplier, look for a substitute first. For instance, negotiate terms and conditions if the supplier doesn’t agree to extend payment terms or provide logistics. Similarly, keep some suppliers in backup to prevent disruptions in projected sales and revenue. These few steps will avoid production and order delays, ensuring a smooth stream of finances in the business.
Today, the accounting and finance industry is subject to constant change. In addition to tech advancements, market, legal, and operations risk are intensifying. Therefore, every business has to upscale its operations to remain competitive in the industry. Perhaps, you can master the art of cash flow and payroll management.
Similarly, choose your clients and suppliers wisely to close doors for production discrepancies and bad debts. Having a few competent measures in place will go a long way in improving financial operations.