In business, there’s no accounting for success—but there is successful accounting. You’ve worked hard to develop a product or service your customers love. However, your ability to experience substantial growth rests often times on your ability to manage your spreadsheets, figures, and money. Unfortunately, out of the estimated 80% of small businesses that fail in the first 18 months, many of fail as a direct result from an inability to manage the numbers properly.
Taking the time to educate yourself about proper business accounting strategies is one of the best things you can do for your business. When you’re proactive about putting systems and policies in place that position you for success, and your business will be much more likely to thrive.
- Budget Accordingly
The oldest and most basic personal financial advice holds true for small businesses. Create a budget and stick to it. Start by figuring out your expenses and then determine how much revenue you need to clear each month to remain solvent. Develop strategies for cutting back on expenses that can be implemented when you’re uncertain about meeting your goals.
- Watch Out for Hidden Profit Killers
Budgeting and keeping track of your expenses can help you identify the hidden expenses that are costing you money on a monthly basis. Periodically go through your budget, look at every major expense and ask yourself if the expense is truly contributing to the success of your business. Staff expenses are the most obvious example of this—are employees accruing overtime without delivering substantive results? If so, it may be time to reconsider their compensation arrangement.
Also look for things like underutilized equipment, excess inventory, and outdated or inefficient computing infrastructure that may be hampering your productivity. Additionally, you should consider if office space is being utilized in the most profitable way possible and warranty expenses. Educating yourself about lean management and implementing a continuous improvement cycle is one of the best ways to manage the challenges of growth and keep your profits strong.
- Keep Accounts Separate
While it may seem like money is money—particularly when there isn’t much of it coming in—setting up a clearly segmented accounting system is one of the best ways to make the growth process easier. Identify and keep track of which funds are coming from loans and which are actual revenue. This makes it easier to maintain transparency in your overall finances, which helps you make smarter, more strategic decisions as your business begins to grow.
- Be Firm About Receivables
Many small business owners have a tendency to think of their clients as friends first, and paying customers second. Too often, business owners will let past-due accounts slip, while simultaneously racking up new debt of their own and making the path to profitability even longer. While there’s no reason to alienate customers or compromise the level of service you provide them, you owe it to yourself to follow up firmly on late receivables and make sure you get paid.
- Pay Yourself First
It’s tempting for small business owners to make sacrifices to see their operation grow. However, it’s important to be mindful of your financial future while doing so. Set yourself a base salary and make sure it gets paid regularly. Avoid using your personal credit card for business expenses and, most of all, set aside a given amount each month for an emergency/retirement fund.
- Tax Laws Are Your Friend
Believe it or not, tax laws at the state and federal levels are designed to help small businesses succeed during the difficult initial years. Educate yourself on what can be written off in your state, and keep track of all your expenses. You already know that legitimate business expenses—including rent, payroll, and equipment—are deductible. Also remember that you can reduce your personal tax burden by writing off business losses.
- Know What You Can and Can’t Do Yourself
If you’re a busy entrepreneur, keeping the books shouldn’t be a full-time job. Be realistic about how much you can do on your own without dividing your responsibilities. Don’t be afraid to turn to a professional for help. Bringing on a bookkeeper in a freelance or part-time capacity can ensure you continue handling your money as effectively as possible.
Whether you choose to hire outside help or not, there are cloud-based solutions that can make managing your important files simple and seamless. Document management software like eFileCabinet can be an incredibly useful ally for any business owner who feels stretched a little too thin when it comes to taking care of paperwork.
Record Management and Document Management: What’s the Difference?
Document management and record management are key priorities in any organization. They are also frequently confused and misunderstood. Here’s what you need to know about each, and how to choose the right platform for your organization.
Documents vs. Records
When comparing document management and record management, the first and most important distinction is the difference between documents and records themselves:
- A document is any piece of information or data pertaining to your business. This is a somewhat generic term and should be treated accordingly. There is often confusion between document management and record management, because many individuals assume they both refer to the same thing.
- A record is a specific type of document that provides important evidence about an organization’s activities, including its financial statements, sales and inventory logs, and more. Because they reflect something that actually happened, they cannot be edited or revised after the fact. Records play an important role in understanding your taxation and regulatory compliance requirements. In many industries, records are legally required to be stored and managed in specific ways.
While all records are documents, not all documents are records. For clarification, consider the difference between a grocery list and a receipt—one is a type of plan or intention, which can be altered later and doesn’t have to correspond to reality. The other provides specific evidence of what actually happened in the supermarket, such as when you made the purchase and how much you spent.
What Is Document Management?
Document management refers to the way all information in your organization is captured, sorted, and shared. It has several key goals:
- Mitigating the risk of data loss
- Organizing files in a way that makes sense
- Facilitating search and retrieval of information in a timely manner
- Reducing the amount of physical and electronic storage space needed
- Improving overall workflows and efficiency at the procedural level
While documents may not have the same intrinsic accounting value as records, they still contain useful information for employees at all levels. They should be properly stored and managed to make access easy for authorized staff. For example, an employee may need to refer to official company policies and ethics guidelines while making a strategic decision such as choosing a vendor, negotiating a sale or planning a marketing strategy.
What Is Record Management?
Record management, on the other hand, refers to the systems and programs used to store records. In some businesses, as many as 90% of documents may be records, leading to a significant overlap between the two management systems. For others, however, record management covers a small subset of documents with different management goals. A record management system establishes polices and procedures that:
- Separate records from data and prioritize their long-term storage and management
- Identify and assign responsibility for important records
- Apply appropriate retention periods and manage disposal or archiving once those periods elapse
- Create a proper audit trail for meeting regulatory compliance requirements
- Facilitate eDiscovery for legal investigations and apply holds when needed
Record management is especially important in fields such as healthcare, where storage and transmission of sensitive patient data is governed by the federal Health Insurance Portability and Accountability Act (HIPAA). Proactive record management can position you to meet these compliance needs, helping you pass an audit by making the relevant data available when you need it.
What to Look for in a Document/Record Management System
While electronic document and record management systems serve different purposes, there are several important features which are common to both. If you’re looking to upgrade or replace your current file management systems, here are a few things to consider:
- Storage space—Effective document/record management systems should be scalable to grow with your business.
- Data encryption—Essential for record management and highly beneficial when storing documents containing valuable confidential or other proprietary information, encryption is a key feature of any quality file storage system.
- Document-level indexing—Indexing is the process by which an electronic management program organizes files for search and storage purposes. A document management system with robust indexing features will improve your productivity and help streamline your workflows.
- Software integration—Record management is easy when your file management system integrates with QuickBooks, MS Office, eSignature and other enterprise software platforms. This allows you to import financial records and other important data, eliminating extra work and reducing the risk of file duplication or data loss.
- Mobile support—If you or your team members frequently work on the road, mobile support for your document and record management systems is essential.
- Role-based security—Control access by assigning roles to different users, ensuring only authorized staff are able to read or alter sensitive documents.
- Auditing—A record management platform should include built-in tools to simplify the external auditing process and assist with internal investigations.
eFileCabinet is the only document management platform that meets these and other requirements. For more information about our programs, fill out the form for a free demo, or contact us at 877-574-5505.