Clean Up Your Cash Flow: Basic Accounting Checklist for Small Business

In any business cash flow is important - this is especially true for small businesses. Your cash flow could be the difference between a bright future and shutting the lights off for good. That’s why it is crucial that any small business keeps track of their cash flow to understand the overall health of business and where improvements can be made.

To help, we’ve created a basic accounting checklist for your small business to use. Sticking to a plan can keep operations running smoothly and your cash flow positive.

1.       Record All Transactions

One of the biggest mistakes small businesses make is not recording every transaction that comes through the door. As a business you need to be diligent here - record all transactions including:

-          paying vendors

-          receiving cash from your customers

-          billing customers for goods sold

If you’re finding it difficult to keep up because you are entering transactions manually, consider adopting an accounting software or looking for an accounting firm to help.

2.       Check Cash Position Daily

Cash is the lifeblood of any business and crucial for small businesses. You don’t want to find yourself checking your cash flow statement to find yourself close to the edge. Make it a habit to check your cash position at the beginning of every day. This will help you better predict your overall position based on the money you receive and the expenses you incur during a month.

3.       Organize Your Receipts

 Keep track of your receipts in an organized manner to keep your cash flow in full view. These include organizing and tracking all cash receipts, payments, and invoices sent. As these receipts come in, make sure to organize them into a chosen filing system.

We recommend having a payroll file, a bank statement file, and a vendor file for your receipts. You can organize these by payroll date, by month, and alphabetically.

 4.       Send Invoices with clear Payment Terms

The biggest risk to your business are late or unpaid invoices. In these situations, you need to stay on top of things and make sure payment is timely. A good practice is start with your largest invoices first – ensure you politely follow up in a consistent manner. This will be crucial to keeping your cash flow positive.

 5.       Compare Month-End Balance with Previous Month

 Assess how well you’ve done managing your assets and liabilities by comparing your month-end balance with a previous period. When doing this, look for numbers that have significantly increased or decreased and analyze why this might be.

Are your accounts receivable way up? Why? Are your customers taking longer to pay?

Cleaning up your cash flow process is essential to long-term business success. This means having a clear and full view of your business’ cash flow at any given time. By building good habits and using the strategies mentioned above, you will be able to optimize your cash flow and keep your small business running smoothly.