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Easy ways to organize business records and track business finances

Tracking your finances can improve business performance. Here’s how to get organized.

Updated

5 min. read

Keeping track of your business finances makes business decisions easier, improves your eligibility for a business loan, and simplifies the year-end tax reporting process.

Here’s what you can do to keep track of your business finances and organize your business records.

1. Get the basics right to track business finances

Any good system starts with receipts. Get in the habit of keeping all of your receipts in paper or digital form – that way, you can enter them later into a spreadsheet or accounting software or turn them over to your bookkeeper. Keep a record of who your customers are, what they ordered and how much they paid.

2. Buy accounting software to organize business records

You can begin to organize your sales and receipts using a simple Excel spreadsheet. However, using accounting software will reduce the risk of errors in your data.

A good accounting package will do a lot of the thinking for you. Modern accounting software makes it easy to enter transactions. Made a sale? Simply enter it as revenue. Paid your telephone bill? Record it as a utilities expense. Try to develop the habit of entering your transactions at fixed intervals.

Accounting software can also generate professional-looking invoices, keep track of who owes you money, help you enter figures accurately for your accountant at tax season, and remind you when things are due.

Most accounting software will integrate with your payment services provider to automatically record customer-facing transactions made through a retail point-of-sale system, mobile payments application or online.

You can buy accounting software or get a user license for a modest monthly subscription fee. Most solutions are cloud-based, which offers some significant benefits over desktop applications, such as:

See all your accounts in real-time – The software will link to your bank account, so everything needed to view your cash position is aggregated in the application.
Increased security – If your computer crashes, your data is backed up elsewhere. Or if someone steals your laptop, they aren’t stealing all your accounting records as well.
View your financial data anytime, anywhere – As long as you have an internet connection and a device, you can update your accounting records on your smartphone.

3. Keep track of cash trends

Cash trends are patterns of money coming in and out of your business that may affect cash flow. Whether you elect to maintain your records digitally or on paper, use them to monitor cash trends and understand their impact.

For example, you might notice a seasonal pattern to your sales and see more money coming in during the summer months – allowing you to put aside cash to get through a cash shortage in the autumn or winter months. Or, you may notice that it is taking longer to collect payments on customer invoices and decide to tighten up your customer credit policy.

“Whether you elect to maintain your records digitally or on paper, use them to monitor cash trends and understand their impact.”

Monitor cash trends to:

Track receivables – Is the amount of time it takes to collect your receivables increasing? Which customers are habitually late payers?
Track customers – Who are your best customers? How much do they spend, and how often?
Track sales – Determine which products or services are best sellers and which are worst. Which products earn the highest profit margin?
Track expenses – You need to know when expenses increase so you can take action.

By understanding the cash trends of your business, you are in a better position to improve your profits and can spot ways your business can grow.

4. Hire a professional to organize your business financial records

It’s easy to think about saving money by doing the books yourself. However, the hours you’ll spend entering receipts could be used for sales, business promotions or managing your team – things that will make you more money. Plus, it’s hard to match the expertise and efficiency of an accounting professional.

Ask other entrepreneurs or your banker for referrals for local bookkeepers and accountants. Make a short list of the best candidates and ask them about:

The services they offer and how fees are charged
Which services are included in those fees and which cost extra – For example, an accountant may charge extra to handle a call to the Internal Revenue Service (IRS) on your behalf
When you can expect an invoice and the number of days you have to pay it
Their expertise in your industry
Customer service standards – Can you expect a reply to an inquiry within a day or a week? Do they prefer to call you or use email?
The accounting software they use and whether it aligns with yours to possibly reduce costs

5. Conduct monthly reviews of your business finances

Experts agree that vigilance is the key to effective business financial management. Review your balance sheet, profit and loss statement, and cash flow statement monthly, and compare them to the previous reporting period. This information is crucial to help you to:

Project future revenue, cash flow, and expenses
Make major purchase decisions
Anticipate and mitigate risk

Recent monthly financial statements will also be required by a lender if you want to apply for a business loan, business line of credit or equipment lease.

You don’t need to be a financial expert in order to grow your business. But keeping good records, capturing all business transactions, reviewing financial reports, and learning about business finance will help you to better understand how your business is doing and facilitate deeper conversations with any outside experts you choose to work with.