5 Effective Ways to Stay on Top of your Company's Finances

Managing finances is one of the biggest challenges that small business owners face on a regular basis. Since staying on top of finances is so important and vital to the long-term success of a business, there are five effective tips that should be followed, which will help a business owner stay organized and on top of their finances.

Have an Accounting System in Place

The effective way to stay on top of your company's finances is to have an effective accounting system in place. An accounting system, which should incorporate quality accounting software, should be able to quickly generate income statements, balance sheets, and cash flow statements. This will allow you to check your current financial position whenever you want.

Create a Budget and Plan

Another tip for managing your business's finances is to create a budget and plan. Your company budget should incorporate all of the expected sources of revenues and expected costs that will be incurred. This will then be able to act as a guide to use when making business decisions.

Regularly Assess Budget

While creating a budget is an effective tool in managing your business's finances, reassessing the budget is also very important. Many factors that are involved in your business's financial conditions are variable and can be out of your control. As these variables become known, you will need to reassess your budget and change it as necessary to ensure you meet your long-term financial goals.

CEO of Walmart, C. Douglas Mcmillon, would be a good example of someone regularly reassessing the budget to ensure that his company is operating at maximum efficiency and does not lose financial stability.

Review all Costs Regularly

The fourth effective way to stay on top of your company's finances is to review all of your costs on a regular basis. When you start receiving bills from vendors and service providers, it is important to compare them to the original contracts signed. If the prices vary from what was agreed upon, you should contact the vendor immediately to receive the appropriate reduction. This practice will help prevent overspending.

For example, Warren Buffet CEO and owner of Berkshire Hathaway constantly reviews costs as he is expanding his company and investing in other subsidiaries such as Geico Insurance and Dairy Queen.

Audit

While they may not be fun to go through at the time, having your finances audited could be very beneficial. An audit will be able to confirm all of your financial records, which will assure you that your financial position is exactly how you believe it is.

For example Frank Vandersloot, CEO of Melaleuca was audited twice by the IRS in 2012. He handled the situation by addressing the problem and by making necessary adjustments within his company.

In conclusion, being able to stay on top of their finances is one of the most important responsibilities that all business owners have. While it can be tough to do so, there are five effective tips that could be followed, which will help any business owner stay on top of their finances.