How to keep track of invoices and payments in a small business
Keeping track of your invoices and payments is absolutely vital to the success of a small business, this is because the amounts paid affect your business' cash flow and in turn, the amount of money you have on hand to pay expenses, whether these are regular expenses or an unexpected expense that arises.
Similarly to personal finances, there are plenty of ways to approach organising your small business finances, these can vary depending on what type of business you run, your business model and of course, your goals for the business in the future. Knowing the exact state of your finances is also one of the best ways to ensure cash keeps flowing enabling you to invest back into your business at a later date.
Keep on Top of Your Bookkeeping
Probably the simplest and most important way to keep track of invoices and payments is to keep on top of all accounts as you go. One way to do this is by hiring an experienced and qualified bookkeeper that is on hand to accurately and efficiently keep records of your financial affairs ready for tax return day.
If, however, you would prefer to do this yourself, it is recommended that you purchase quality DIY accounting software such as quickbooks. When choosing your accounting software, it is important to look out for the following:
That the accounting software in question is cloud based, this will allow you to access the programme from anywhere, anytime which is far more convenient than software downloaded to your computer.
The software should also provide a layer of trusted encryption and a firewall. This information should be available on any good accounting software company's website.
Choosing an accounting software with pricing tiers can also be a great move, and most software worth their weight will offer this. If you only have a very small business with low annual income and few tax complications, you will likely not need a top tier model with all the bells and whistles.
Track Income & Costs Accurately
Maybe an obvious solution, but accurately tracking the income of your small business, whether on a monthly, weekly or even daily basis, allows you to have a comprehensive understanding of what money you are bringing in, and where from. This can help you in a number of areas, such as making income projections for the coming months or years, as well as enabling you to look at patterns and determine if, when and sometimes even why your income may fluctuate. You will also be able to measure performance against targets to see where you can potentially improve your overall efficiency.
Reviewing your costs can, as mentioned previously, allow you to keep track of your small business expenses. In the day to day running of your company costs can add up quickly so keeping a tight record of these will allow you to fine-tune where your money goes as well as predict any frequent costs and plan for future expenses.
When trying to keep track of your small business' payments, one easy way to start is by ensuring that all payments you receive are done so smoothly. To do this you will need to determine which method of payment works best for your company and its structure.
For example, if you are a service-based company, you may choose to invoice your clients which will need to be done regularly and most importantly - accurately.
If, however, you are a business that sells products then ensuring you are able to take most payment types, both at your physical location and (if applicable) online is key.
Whilst considering your options you should take note of the fees involved from your side, what is most convenient to your customers and of course, what allows you to keep a tight eye on your invoices and payments.
Digitalise Hard Copies
Lastly, one of the best ways to keep a track of your invoices and payments is by sorting through any paper copies of past invoices, licenses, employee details, bank and general accountancy records and digitalising them.
Having quick and easy access to any files required, whether it be for your own knowledge or for the tax man, will make your life a whole lot simpler. Simply open a file rather than wading through years' worth of paperwork.
As most banks are offering customers the option of “going paperless” nowadays, digitalising your banking records and keeping track of payments could be easier now than ever before.
If you would like some support in keeping track of your business' invoices and payments, then please do not hesitate to get in touch with a member of our dedicated team, who will be more than happy to discuss your requirements.