You’re looking to start a business, or maybe you already have one. It takes a lot of time, effort and energy to run a company efficiently and profitably, especially if you’re dealing with a wide variety of factors like hiring, R&D, long-range planning, and others.
Whatever you do, keep a firm accounting of your finances, advises Michael Majeed, a financial services executive and consultant. Majeed, who works as a senior financial consultant and regional sales manager at Markham, Ontario’s Arck Innovative Consulting Corporation, an SR&ED tax credit firm, consults with mid- and large-sized Canadian corporations on an ongoing basis.
Michael Majeed advises owners of all types of enterprises to employ what he considers to be best practices in order to place their companies in the most advantageous position. To truly build a successful business you need to know how to utilize strategies and best practices that will help you get ahead.
With this in mind, Majeed includes these five guidance points.
Learn how to read, interpret and understand your company’s financial operations.
Depending on the size and corporate structure of your company, you might have a CFO or controller on staff. A smaller company might assign accounting tasks to an employee who knows how to manage them. Or you might have an outside accountant who handles your books.
In any event, your financial documents will likely include a balance sheet, which lists the company’s assets, liability and capital; cash flow statements that record cash in and cash out, and profit and loss statements that tell how much revenue was generated and expenses that were incurred during a specific period of time.
“These documents monitor your company’s financial position and keep you financially informed on an ongoing basis,” says Michael Majeed. “This can help you make good business decisions.”
Retain the services of outside professionals.
From vendors to lawyers and other professionals, you’ll need to enlist the help of people from outside your business walls to carry out necessary tasks that you or your team can’t complete on your own.
In the financial realm, Michael Majeed explains that with the proliferation of online and app-based accounting tools now available, it’s easier than ever to keep track of your business’ finances. Still, he advises you to retain the services of an outside accountant or firm when needed — even if it’s only a few times a year — to ensure that everything is being done accurately and that records are being kept correctly.
“Your accountant might also advise you on the accounting method that’s most appropriate for your company,” he says. “For example, cash basis accounting is probably the easiest way — you simply record revenue when you receive cash and expenses when bills are paid.” He notes that there’s also the accrual method, meaning that revenue is recorded at the time you receive it and expenses are recorded when you get an invoice.
Keep apprised of the latest technology.
As mentioned there are some great software products and online services that make it really easy for the business owner to handle the company’s operations. Having them won’t make you a professional in every single area, but they can help give you the peace of mind that comes with knowing that automated technology is helping you maintain your business. Majeed suggests asking your network or other entrepreneurs what they might recommend, and also reading technology media blogs to check out reviews of such products to explore what might work well for your company.
Be aware upfront of tax laws and deductions.
As you know, there are a variety of business-related expenses that are tax-deductible under law. What you might not know, however, is the full range of items you can deduct. “It’s smart to be aware of what all these items are,” says Michael Majeed, “so you can plan to keep receipts and record tax-deductible expenses into your company’s books.” He notes that it’s most advantageous to do this promptly so you don’t find yourself scrambling at the last minute when taxes are due.
Keep records of everything.
Keeping a paper trail (these days – a digital trail) can be helpful, and many companies and organizations find it best to follow this simple practice. You’ll be able to track how your company has performed on a monthly basis, which can also help you project how you’ll do in the future. By keeping monthly records, you’ll also be more informed when it comes to making decisions about adjustments in operations and other areas.
“Also,” Majeed says, “Don’t forget to reconcile your bank statements each month as well. As soon as you get your statement, check it against your company’s books to ensure that everything is accurate.”
Michael Majeed says that it probably goes without saying that your company’s bank account should be separate from your personal account.