How to Make Correct Accounting and Business Decisions?

Effective decision making is important for businesses to thrive in this highly competitive landscape. Decision making is an important skill for managers that can both impede and drive the success of a company.

According to a report by McKinsey research, making inefficient decisions by managers results in up to $250 million worth wasted labor cost each year.

Business managers need to improve their financial decision making skills to ensure that their company continues to operate in the green. Here are some tips for business executives to make the right decisions regarding their business.

Create Minimum Monthly Targets

Business owners should focus on the monthly targets for their business. In majority of the cases, business owners tend to ignore short-term goals. They focus on the annual targets due to which they don’t prepare metrics for the current performance.

You need to set monthly targets for each month. It is important to state goals such as: “We must keep monthly costs to $____ for the department to achieve our annual goals”.

Focusing on your monthly goals will help you achieve your long-term targets. Setting small goals is crucial in achieving the big strategic goals for your company.

Customer Credit Management

Credit management is also important for any business. Companies need to carry out a background check of each customer before making credit sales. Oftentimes, companies don’t check the financial capacity of the customer in making payments for credit sales.

Sales personnel must advance each client’s case to the accounts department for background check before allowing credit sales. The credit check should be made every time a customer makes an order for credit sales.

Customers with poor credit records should not be allowed to make purchases on the credit. It is important that the sales team cancel orders with customers with a bad credit record.

Separate Personal from Business Expense

Small business owners must separate personal from business expenses. The two expenses should not blend into one as it will create problems when auditing financial records.

Keeping the personal and business expenses separate will benefit in various ways.

The main benefit of keeping the expenses separate is that it will allow you to avail tax credits. You must consult with a CPA tax professional on all possible expenses that can be deducted as business expenses when submitting the tax report. But you should keep separate personal and business accounts if you want to claim the deductions.

Another reason for keeping the accounts separate is that it will allow you to know whether your business is making a profit. You can’t see the true picture of your company’s financial position if you don’t keep the personal and business expenses separate.

By keeping the expenses separate, you can more easily convince the IRS about approving business deductions. It will also help you convince creditors to give you a loan, as you can show that you have the capacity to pay back the loans.

You can also get additional funds from investors when you keep your personal and business expenses separate. Investors will want to see the business income and expenses so that they know about the potential returns on investment.

Save All Supporting Records

You must save all supporting records that verifies business expenses. It is important to save documentary evidence of every expense. Whether you make payments by cash, checks, online transfer, credit or debit card, it’s vital that you save electronic or manual records that verifies the transaction.

Businesses are required to keep supporting records of payments in excess of $75. But you must keep a record of all payments, even small amounts as it will make the auditing process much smoother.

You can use a software to record all the payments and the supporting evidence. Most accounting software allow you to scan paper records so that you can keep a digital copy of all the manual records.

Review Financial Statements

Every business owner must review accounting statements to find out the performance of the company. You must hire outsource bookkeeping service providers to keep a record of all your financial transactions.

You must look at the financial reports to know about monthly performance, trends, and issues related to the financial performance of your business.

The outsource bookkeeping service provider must have trained accountants who can handle the bookkeeping tasks in a professional manner. The accountants must have knowledge of the generally accepted accounting principles (GAAP) so that they can prepare the books in a standard format.

Accurate record of financial data is important to ensure that you make informed financial decisions. Mistakes in recording business transactions will result in an inaccurate representation of the financial position of a company. You cannot make effective decisions if the financial transactions are not properly recorded.

Small businesses need not hire a full-time accounting professional. Outsourcing accounting and bookkeeping tasks will help keep operational costs low. It will help in getting the help of the experts without having to hire full-time professionals.

You must make sure that the bookkeeper records the expenses and income with a focus on accuracy, timeliness, and consistency.

Accurate record of financial transactions will allow you to make good business decisions. It will increase the chances of your business being successful.

Create Effective Business Policies

Effective business policies are important if you want your business to succeed. It is critical to create policies for every aspect of the business from making payments, serving customers to selling on credit. You must create policies for timely preparation of tax reports, salary preparation and execution of contracts.

You must not just create policies but also train your staff so that they are able to follow the policies. Consider asking your staff to take tests so that they know about the company policies. Compliance with the policies will ensure smooth business operations that will make it easy for you to manage the business.

Maxim Liberty is a trusted and experienced virtual bookkeeping service provider. We can help you in recording business income and expenses in compliance with accounting standards and regulations. Contact us today by dialing (703) 957-6938 to know more about our services.