Category: Finance

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Finance

5 Good Bookkeeping Habits for Small Business Owners

5 Proven Bookkeeping Tips to Increase Cash Flow in your Business

Do you feel that bookkeeping is not an important business activity?  You’re probably wrong if you think so. 

What about money in the bank that could help you achieve your desired business goals? Now we’re talking.

You don’t have to make bookkeeping more complicated than it needs to be. Adopting some basic, good bookkeeping habits can help you avoid costly errors and stay top of your books each month with little-to-no hassle.

We have put together 5 bookkeeping tips for small business owners. 

Follow these good bookkeeping habits to get a bigger and better handle on your cash flows:

1. Plan for Major Expenses
 

Is it likely that you will need a major computer upgrade or any equipment or machinery that needs to be replaced?

  • You should be very honest and put such expenses that could be coming up in the next one to five years, on the calendar year in advance.
  • Many small businesses are seasonal in nature, hence, it is essential for business owners to acknowledge the seasonal ups and downs, and how it will affect their ability to spend during those times.

By making sure that you have forecasted for major expenses and ups and downs of your business, you’re less likely to miss on business opportunities or finding yourself short of cash.

2. Track Your Expenses

It is important to track each and every expense, to keep your business’ cash flow going in a positive direction.

  • Before you start paying, tracking, and accounting your expenses, you need to separate your personal and business expenses.
  • Open a separate bank account for your business, so that you don’t have to waste hours examining your expenses at the end of the month. You will know the exact amount that your business has spent and the areas where the amount is spent.

At the time of tax filing, it’ll be much easier for you to write-off relevant business expenses.

3. Record Deposits Correctly

Adopt a good bookkeeping habit to record deposits correctly, whether it’s a pocket notebook and pen, an excel spreadsheet or a proper financial software. 

  • Small business owners typically make a variety of deposits into their business account throughout the year, including, sales revenue, loans or cash infusion in the form of capital from personal savings.
  • You’re keeping yourself open to paying taxes on the money that isn’t your income if you’re not accounting from where each of the deposits have come. 

4. Set Aside Money for Taxes

You know, as a small business owner, you have to pay taxes to the government at certain deadlines that are already known to you.

The income tax department imposes penalties and interest if the tax amount gets delayed or remains unpaid. 

Hence, a good bookkeeping habit is to systematically put money aside for taxes, to make sure that the money is there when you need it.

5. Keep a close eye on your invoices

Many small business owners & entrepreneurs have to sell products on credit basis to their customers. 

You should have a specific person to track billings of your business and a proper process in place, if a bill goes unpaid.

In case of late payments, you can do the following:

  • Issuing a second invoice
  • Making a phone call to remind the customer
  • Levying penalties such as extra fees after a certain deadline
  • Having policies for if a customer pays 30, 60 or 90 days late.

You should always remember that ’Every late payment is an interest-free loan and hurts the cash flow of your business’

With your books in order, you’re now ready to achieve your long-term goals, manage cash flows during seasonal ups & down, and improve the profitability of your business.

By analyzing your books, you’ll know exactly how much cash you need and how much you can afford.

Hence, good bookkeeping habits lead to better financing and cash flows of business’it’s that simple.

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Finance

Cash Flow Mistakes That Can Shut Down Your Business

Cash Flow Mistakes that Every Entrepreneur Should Avoid

Small businesses usually have a few people handling multiple functions; hence business cash flow needs to be given priority. Sometimes there are hidden expenses that the entrepreneur does not account for which impacts the cash flow situation.  Hence, you need to monitor and optimize the cash flow management and try and remain cash positive. Here are some of the cash flow mistakes made by companies that can hurt the business

1. Forced Growth

  • Sometimes a company’s tend to grow without enough cash management. Unplanned hiring, too much investment in marketing or maybe a product development that has gone wrong, steps like these during business expansion can take a turn for the worse
  • The cost of a few bad hirings can hamper your cash flows. You cannot spend too much time on their training only, the results need to show. So be careful when hiring expensive manpower

2. Unanticipated Expenses and Emergencies

  • There can be a lot of unexpected expenses that a business can incur. Whether it is a natural disaster, an economic slowdown, an equipment failure or complaints from customers, every company has unplanned emergencies and not make a contingency plan for such business cash flow can lead to blunders.
  • Sudden changes in the taxes or other defaults from the taxpayer can affect the cash outflow.

3. Excess expenditure on Sales

Every business needs to acquire new customers but you need to see at what cost you are acquiring them. Maybe initially it can be at the cost of suffering loses, but soon you need to lower the CAC and also segment that which customer will help you generate revenue.

4. Being profitable but broke

  • This is a strange scenario that takes place in many companies. The money you are making is not translating into positive cash flows
  • You need to reinvest in the business in the beginning for growth, unnecessary expenditures need to be avoided at any cost. If the founder starts to draw a handsome salary from the first month, it will be a big cash flow mistake

5. Short-Term Profit Alignment

  • As an entrepreneur, you keep getting ideas that can be converted into a product and sold into the market. However, you see that the sales hit the roof in the first 2-3 months and then the demand began to fall.
  • Successful entrepreneurs set long term goals. The get-rich-quick ideas will only drain your business cash flow.
  • If you like to take short-term risks, then be smart to make something out of your existing line, sell for a short time, make money and fizzle it out

6. Increase in late payment or overdue from customers/suppliers

  • If you sleepover such overdue then the third party takes it for granted that you can work without cash for a long time
  • If your customer makes late payments, then you cannot pay to your vendor on time and this spoils your credibility in the market
  • Allowing too much credit can turn out to be a huge cash flow mistake 

Costs are like magnets, they try to draw out all your money, making you a little helpless in such a situation. Hence, for business cash flow management maintain proper records and spend your cash carefully so that the company does not face a disastrous situation during tough times.

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Finance

3 Important Financial statements Every Business Owner Should Know

3 most important financial statements for your Business

Trying to run a business without keeping a check on the Cash flow, Balance sheet and Profit and loss statement is like driving a car without the engine. It is critical to understand this concept to plan the future and manage your operations and taxes. It is also important to keep your financial health in check as your investors might ask for these statements at the time of fundraising and you don’t want to have enough cash in your business. Financial statements are the best source to evaluate the weaknesses and strengths of your company’s financial health.

Let’s understand each of these important financial statements in detail:-

1. Cash flow

7 out of 10 start-ups fail because of poor cash flow management. Running out of money is the most critical situation where most of the start-ups fail. You always need to know where the money is coming from and where the money is going. A Cashflow financial statement helps your business to identify the risks while moving forward. It also records all the relevant activities for the current period. Cash Flow management is the amount of cash collected and used by a company during a period and is one of the most important aspects to understand running a business.  You are going to put your business in a very dangerous position if you don’t stay on top of your cash flow.

Let’s break down cash flow into 3 important financial statement categories:-

  • Operating cash flow – The money which is coming from normal business activities.
  • Investing cash flow – The money which is coming from investing activities like- Property, Plants, stocks, equipment, etc.
  • Financing cash flow – It includes transactions involving e
  • quity, debt and dividends.

2. Balance sheet

The balance sheet reflects the financial statement of your company. It is a combination of your company’s assets and liability.  If both assets and liability match then only your account is balanced. Let’s understand the balance sheet–

A balance sheet helps in determining the financial stability of your business. Investors and creditors always analyze the balance sheet of your company before investing. A balance sheet also indicates the unexpected expenses and your liquidity position.

Asset + Liability = Equity (It shows the basic accounting equations)

  • Assets – Asset includes inventory, investment, equipment and machinery, cash, account receivables and checking account. Assets are the resources that are owned by the business owner and can be measured.
  • Liability – Liability includes things that you owe to others like- loans, share capital, surplus, payroll, etc.
  • Equity – Equity includes the capital investments that you have made in the business.

Look for these items when reviewing the balance sheet:-

  • Negative Balance
  • Balance which seems too low or too high
  • Balance in the account that must be zero
  • Balance in account payable (AP) and account receivable (AR).

3. Profit and loss statement

Profit can be made when your revenue exceeds costs or expenses but if the cost exceeds revenue then a loss is projected.

The profit and loss statement records the performance of your business and shows the result if the company is financially healthy or not.

The profit and loss statement shows where the money is being allocated and also breaks down the business cost into categories for your financial statement.

Let’s look at the components of profit and loss:-

  • Income – It refers to the revenue earned by your company by the core operation and secondary sources such as interest income.
  • Cost of goods sold – It includes the costs related to the product sale in your inventory. The cost of goods sold is also known by the cost of sales.
  • Gross profit margin – Gross profit margin is the difference between the revenue and the cost of sales. It indicates the ability to cover the remaining expenses apart from the cost of sales.
  • Operating expenses – It includes selling, administrative, salaries, and general expenses.
  • Operating income – It comes by subtracting the operating expenses from the gross margin.
  • Depreciation – It reflects the reduction in the value of an asset like equipment that is being used to generate income.
  • Interest – Interest refers to the cost of borrowing funds to finance the business’s assets.
  • Net Income – It reflects the company’s bottom line. If the company’s expenses exceed then it will be recorded as a net loss.

These Important Financial statements are critical to evaluate the performance of your business yearly. As a business owner, one must know the basics of these important financial statements to understand the monetary health of your company. It will also help you to take the necessary decisions on time.

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Finance

How to Recover Money from the Market? 2025

To know how to recover money from the market, you just need to follow the 10 tips to recover money from the market given below.

Tip #1: Check the Payment History of Your Customer

Check the payment record of your customer. It is one of the tips to recover money from the market.

If he timely pays the other vendors, there are chances that he will pay you on time as well.

If he is not paying other vendors on time, he won’t pay you on time as well.

Tip #2: Use the Well Written Contract

 

Every sale you do should be governed by a written contract and crafted by an Attorney.

One of the tips to recover money from the market is to use a well-written contract.

It means your deliverables, time frame, dispute handling, and payment expectations should be mentioned clearly in a contract.

If the language of a legal contract has some mistakes and weak statements, then you can face some problems in the future.

Tip #3: Use a Delivery Acceptance Letter

It is also one of the tips to recover money from the market is to ensure acceptance letter on the delivery of goods and services.

It works as a Proof or Record for your delivery services.

You can also use this paper in further communication like Time of Delivery, Name of Recipients, Invoice, etc.

Tip #4: Issue Clear Invoices to Your Retailers

While giving the invoice to your customer, mention all the Terms & Conditions clearly.

You should also ensure that the invoice should be received by the right candidate.

Tip #5: Follow-up with the Clients Regularly

To maintain regular Cash flow and Profit, there is a need for consistent follow-up or continuous communication through e-mails, business chat messages, calls, etc.

To run a successful business, cash flow is very important. It gives you the purchasing power and helps you to sustain in the market.

Tip #6: Handle Dispute Professionally
“Professionalism is a key to success”.

Your tone and voice should have a nice Verbal, Vocal and Visual Effect.

It is helpful in resolving the issue related to Product, Project Objection, and Market Competition.

So, handling disputes professionally is one of the tips to recover money from the market.

Tip #7: Incentivize the Early Payments

If your customer pays you early, then give him/her extra benefit. This benefit will be considered as an incentive and not as a discount.

So, incentivizing the early payments is also one of the tips to recover money from the market.

Tip #8: Charge on the Late Payments

If your customers make late payments, then you can also impose charges i.e. late payment fees so that same behavior shouldn’t repeat in the future.

Tip #9: Know When You Need External Help

When the above mentioned tips to recover money from the market does not work or it is not easy to get back your money from the market; you can also take either help from Recovery Agencies or Legal support.

For Example:

Banks take help from recovery agencies to recover its loan amount or pending bills of Credit card from the customers.

Tip #10: Relation and Reputation is the New Currency

If you know the art of making good professional relations or communication and have a good reputation, you can better negotiate and it will work like a powerful currency for you.

These tips to recover money from the market will help you recuperate yourself from losses and once again take your business on the track.

Categories
Finance

Do You Want to Invest in Learning or Earning?

पटरी पर लौट रही अर्थव्यवस्था
पटरी पर लौट रही अर्थव्यवस्था

Introduction

  • Do you want to get unlimited growth in your life?
  • Do you want compounding growth?
  • Do you want to invest in learning?

Everyone is running after earnings, but sadly no-one wants to invest in learning. If you invest in your learning, earning will follow automatically.

”Best investment in your cash can anytime Crash, but the Best Investment in your Brain will give you the highest Gain.”

– Dr. Vivek Bindra


To understand the reason of why invest in yourself, read through the complete article.

 

Compounding Inflation

 

Compounding inflation shaves off your saving accounts. Before understanding compounding inflation, let us understand what is compounding effect.

When interest is applied to the interest of the principal amount, it is called compounding interest. This is the compounding effect.

 

So, inflation is decreasing your buying and purchasing capacity. It is eating away the actual value of your money.

Let us understand this with the help of some examples.

For Example

In 2000, the average fee of doing an MBA from an average college was Rs 200,000. The consequent salary package of that MBA student was Rs 300,000.

In 2015, the average fees of doing MBA was Rs 2,000,000 and the salary package that MBA students got was Rs 900,000.

This shows that the cost of education has increased 10 times but the cost of earning has increased only 3 times. This is called inflation.

 

Inflation is not just reducing your return on investment but it is also including negative growth.

 

Example:
If the inflation rate is 8% and you are getting a return of 4% on your savings account. This implies that you are de-growing by 4%. It means that 50% of your money value is de-growing.

You are not experiencing growth in your life because the rate of inflation growth is higher than or equal to your salary growth.

Compounding Growth

If you are growing with compounding growth, then the inflation will become very small and you will become powerful.

Suppose 3000 Assistant Managers are promoted after every 3 years turn-by-turn in the car manufacturing company.

 

By this logic, there should be 3000 Directors and 3000 Chairman.

But this is not the case!

 

There is only one Chairman and a few Directors because people in lower bands are promoted initially but later their promotion takes place slowly.

 

Why invest in yourself?

When you stop investing in yourself, after a certain time, the turn-by-turn promotion stops coming.

You can get compounding growth only by ’out-of-turn promotion’ in which the salary packages increase with a very high percentage.

In such a case, an increase in inflation will not affect your growth.

 

How to get out-of-turn promotion?

You can get the out-of-turn promotion by investing in your brains.

All the millionaires have not become a millionaire by investing in the market but by investing in their business and their brains.

 

Whether you are an employee or an employer, there is only one way to grow – invest in learning, investing in your brains.

Some examples of millionaires who invest in learning:

Successful People Reading Habits
Bill Gates Reads 500 pages book in a day and 50 books in a year
Oprah Winfrey Reads one book in a month
Mark Zuckerberg Reads a book in every two weeks
Warren Buffett and Elon Musk They say that they are successful only because of reading book
So, eliminate the effect of inflation on your growth by investing in learning and the brain.