Separate Personal and Business Accounts

You may want to consider switching to accrual-based accounting instead of continuing with cash accounting. Accounting that documents revenue and expenditures as they happen, not when payments are received or made, is called accrual accounting. The accrual accounting method ensures that the time between incurring an expense and paying for it is not delayed, nor between receiving payment and selling something.

It is a good idea to enter an invoice as soon you get it into your accounting program, even if it won’t be paid until later. The accrual system gives a much more accurate view of your company’s performance. Do you have a lot of stock in the warehouse and a high number of costs that are higher than your revenue at the end of the financial year? If you look at this as an https://www.easycorp.com.hk/en/accounting advantage, it’s not a problem!

On the 30th, you should review the report to determine if software used for managing your inventory and warehouse keeps daily records of stock. Add a “Finished Goods,” line to your account sheet. This line would reflect the current value of all the stocks you own. You can express this figure either as cost or retail value, depending on what you prefer.

It is easier to successfully plan regular inventory flows in the next year when you understand what your stock level, sales and purchases are. Inventory turnover is ideal so your COGS and margins reflect changes to costs. In certain situations, small businesses are eligible to claim a quick write off of their assets. Owners of assets can deduct the cost of their asset in the same year it is installed, ready for use or put into service.

You can then decide if the charges will be fixed or variable. No matter how large or small the company becomes, fixed costs will remain constant. However, variable prices can change based on how many items are sold. If you are using email marketing, for example, your monthly cost might be around $100, no matter how many campaigns or products you sell. But the price of packaging will change in relation to sales. In this case, you could estimate the cost of constant payments by calculating your monthly expenses. Then, you would calculate the variable payment as a percent of sales.

After creating a budget, you will see where your spending could be decreased and in what areas it can be increased. If you want to increase your digital advertising budget, then you may decide to reduce the amount you spend in conferences.

Along with the usual expenses associated with operating a business, the outflows consist of payments to shareholders and loan repayments. A sum is known as closing cash at the end each month. This sum is added to the cash balance at the start of each month.

For your business to grow successfully, you need to know your cash flows, and this is all about the timing. To make an accurate prediction of your cash flow, you could use a template.