August 4, 2017 by OSYB Staff
Knowing exactly how much you are spending and how much you are making are key indicators of how healthy your business really is. Anecdotes and observations are not enough, you need hard numbers. A healthy small business has systems in place to ensure that profit is priority, expenses are closely monitored, and that all team members are up-to-date on what they need to know to keep the business healthy and running.
Intuit QuickBooks shares 7 important ways to track exacting data on your spending and earning.
- Review your Chart of Accounts – A chart of accounts should hold all the account numbers of the accounts you use to pay transactions. You should review your chart of accounts monthly to ensure that all accounts and transactions are up-to-date. If your chart of accounts is not exact then the validity of your balance sheet and income statement are in question.
- Automate your income and expense tracking – Manual entry of data leaves room for human error. Accounting software can link your bank account and credit card activity directly into your accounting records and keeps all the data timely.
- Use accrual accounting for maintaining the chart of accounts- Know the difference between accrual counting and cash basis accounting.
- Use variance analysis to find opportunities for improvement – Compare your budgeted amounts to actual data on a monthly basis and make changes in timely manner if needed.
- Correct pricing and estimates on a regular basis – Stay ahead of the game, and correct your pricing throughout the year to ensure that your profit margins are steadily performing.
- Study your profit margin ratio – Knowing your profit margin ratio enables you to make comparisons of sales levels and product lines.
- Automate your accounting – If you want to be spend more time increasing your business, automating your accounting will you give that freedom.
Read more: Business Health: How Much Money Are You Really Making and Spending?