Small businesses (fewer than 500 employees) account for 99.7% of all businesses in the US. About two-thirds of new businesses survive two years, half will survive five years, and one-third will survive 10. Poor cash management accounts for 82% of business failures and cash flow is a “continuing” problem for one in five small-business owners.
In regard to expense management, employees losing paper receipts is the top complaint from finance professionals. And, the IRS won’t just take your word for undocumented expenses.
There are many strategies small businesses can undertake to create and maintain optimal cash flow and manage expense reporting:
- Keep accurate records regarding customers, sales, and inventory as a historical reference and as a guide in planning for the future.
- Monitor cash flow. For a business to be successful, it must have sufficient cash to pay its expenses, make loan payments, pay taxes, and purchase new assets.
- Track spending. It is estimated that most companies are wasting about 30% of their expenditures on items that do not have any impact upon their customers.
- Segregate personal and business accounts. Having a separate bank account keeps records distinct and will make life easier come tax time. Partnerships, LLCs and corporations are legally required to have a separate bank account for business. Sole proprietors don’t legally need a separate account, but it’s a good idea nonetheless.
- Set up automatic deposits and payments. Customer payments and other deposits can process immediately and recurring bills can be paid on a specific day, providing better control of cash flow.
Advantage can partner with your financial institution to provide solutions for your business accounts including business debit cards, Checkcard alerts, prepaid gift and incentive cards, and rewards programs.