If a business hopes to turn a profit and grow financially, it must keep a close eye on its cash flow each month. Properly tracking income against your current purchases and regularly updating your reports is crucial for understanding your business’s financial health.
There are various ways to keep track of these monthly finances, and it’s important to choose the right one for you. To help you decide, we asked a panel of Forbes Business Council members to share their favorite methods. Here are some ways you can help keep your business on track.
1. GAAP
Generally Accepted Accounting Principles provides a common set of accounting principles, standards and procedures. If you’re not familiar with GAAP, hire a freelance or in-house accounting professional to get your books in order. For smaller businesses, start with Intuit Quickbooks or a SaaS comparable. As your business grows, invest in your accounting and finance infrastructure. – Scott Amyx, Amyx Ventures
2. Daily Data Entry
Don’t wait to make sales entries. Use an accounting system such as QuickBooks or a point-of-sale system to stay up-to-date on what’s coming in (and what’s going out). That’s a sure-fire way to stay on top of profitability and make sure to pivot if things start rolling into the red. – Hoda Mahmoodzadegan, BAḴT Global
3. An Automated, Integrated Tech Stack
Your finances should be automated and integrated. From invoicing to revenue collection to accounts payable to bookkeeping and accounting you should be leveraging tech tools to manage that stuff in real-time. They all work with each other and have analytics and reporting, so you’re always on top of your numbers. – Craig J. Lewis, Gig Wage
4. Reconciling Your Entire Balance Sheet
It’s far too common for businesses to only reconcile their bank accounts. The best practice is to reconcile your entire balance sheet as you’re closing the books. If you’ve reconciled everything, your purchases will be accurate. – Mike Whitmire, FloQast
5. Evaluating Costs Versus Net Profit Per Product
It’s very easy to look “good” on paper with gross sales, but all the sales in the world won’t save you from a lack of profit. Re-evaluate your actual costs and understand your realized net profit per product or activity. You might be selling something that’s losing you money! – Jeff J Hunter, BrandedMedia.io
6. Building A Habit Of Regular Financial Review
There is countless software to reconcile and track real-time purchasing, which means your accounting should be accurate and current when they’re needed for critical business decisions. But why do most companies fail to have the books ready at a moment’s notice? Habit. Get in the habit of shoring up financials on a monthly, or weekly if possible, frequency. Your CPA and Board will thank you. – Kyle Mitnick, Advertise Purple
7. Daily Cash Statements And Monthly Reconciliation
There are two methods that can help ensure monthly financials reflect current purchases. One is maintaining daily cash statements. A second is reconciling bank statements each month. Preparing a bank reconciliation every month is needed because the cash balance on your books will not agree with the balance on the bank statement. The use of either method depends on the business owner’s needs. – David Crean, Objective Capital Partners, LLC
8. A Strong Tech Infrastructure To Track Purchases
Establish a strong technical infrastructure. For example, if you’re using Facebook, make sure the pixel is correctly integrated. If you have a lot of purchases that aren’t recorded, set up some infrastructure where emails gathered in Shopify or your e-commerce platform can be reconciled with Facebook, as this can speed up learning and drive even better results on top of proper attribution. – Kevin Zhang, Kreator eCommerce
9. Monthly Purchase Follow-Up
Follow up on any monthly purchases throughout the month. By checking your finances on a more consistent basis each month, it ensures that you can detect any discrepancies or follow up with the right people if needed. Instead of scrambling at the end of the month to sort through your purchases, stay organized and establish a process to follow each month. – Beth Worthy, GMR Transcription Services, Inc
10. Categorizing And Detailing All Expenses
Always detail each and every expense that comes up on your company card and bank accounts at the end of each month. It takes a couple of hours, but it demonstrates just where your income is going. It also saves a ton of time come tax season since everything is easily accessible. During this monthly financial summary, I send this to my co-founder and wife who reviews and tries to reduce costs! – Maurice Harary, The Bid Lab
11. Consolidating To One Credit Card Account
If possible, consolidate business expenses in one credit card account. Most card companies automatically categorize the spending in different categories (ie. travel, supplies, etc.), making it easier for your accounting to sort through all the receipts. This approach works as it makes month-end accounting a lot easier to process and will give insight if something was either over- or underspent. – Lorenzo Escobal, Inception Automotive Inc.
