Do you run a manufacturing company and you want to plug financial leaks? If YES, here are 15 best practical accounting tips for small manufacturing businesses.
One of the most lucrative professions that people love to take to is the accounting profession. This is one course that will never go into extinction as accountants will always be needed in private and public businesses.
However, the reality is that not all businesses can afford the services of an auditor accountant. The good news however is that you may acquire some useful information that will help in managing the account of your small business.
It is for this reason that if you are in the manufacturing business or even in any business at all, your ability to put proper accounting processes in place will go a long way to help you grow your business. The truth is that if there are leakages in your business, you are can hardly make good profits and if care is not taken, the business might close up.
When we talk of accounting tips for small manufacturing businesses, we are talking of taking proper account of goods produced, raw materials, human resources, clientele base and finances amongst others. So, if you own a small manufacturing business in the united states and you want to grow the business, then you would have to consider these accounting tips.
15 Best Accounting Tips for Small Manufacturing Businesses
- Open Various Corporate Accounts for Different Purposes
Of course, it is the standard practice for a company that truly wants to grow to ensure that they have various corporate accounts for different purposes. Aside from the fact that it will help your small manufacturing company grow, it will also help your company stay focused and leverage on different banks to access loan facility.
The truth is that if you use just one corporate account for your small manufacturing company, you will get things muddled up, and the chance of having options when it comes to applying for loans will be restricted to just one.
For example, if you have corporate accounts with three different banks, if bank A and bank B were unable to give you loan due to reasons best known to them, bank C might be willing to give you the loan. You may choose to open an account for procurements, payment of salary, savings account and investment account etc.
2. Get The Right Account Software
I dare say that perhaps the most important tip when it comes to accounting tips for small manufacturing businesses is to get the right accounting software. With the right accounting software, you will be able to effectively manage all your accounting concerns.
The truth is that you don’t have to be a chartered accountant to be able to leverage on the advantage accounting software brings to the table.
You can choose from a host of software such as FreshBooks, Xero, Zoho Books, Sage Intacct, QuickBooks Enterprise, Brightpearl, NetSuite ERP, Happay, SAP Business One and Microsoft Dynamics GP amongst others. Just get their trial version so as to study them to know if they are suitable with your business.
3. Hire Competent Accounting Officer
Being a Jack of all trade is good, but the fact remains that you can’t be master of all trade, hence the need to employ competent people in your small manufacturing company. So, part of the tips that you need to effectively operate your small manufacturing company is to ensure that you hire a competent accounting officer to handle all accounting concerns in your organization – it is just the way to go even if you just want to hire a handful of employees due to financial constraint.
4. Audit Your Account on a Regular Basis
Another very important accounting tip for small manufacturing businesses is to ensure that they audit their accounts on a regular basis.
Although, it is a standard practice in the United States and all across the world for businesses to audit their accounts at least once in a year, or half a year, but it will not be out of place to audit your own account quarterly. The truth remains that when you audit your account on a regular basis, it will enable you see areas where you need to work on, leakages that need to be blocked and the route to financial projection and growth.
5. Keep Proper Records of Invoices and Receipts
If you are in business, you would not want a situation where you would be unable to present invoices and receipts when they are requested for either by the court, your bank, tax officer, the government or an external auditor. In essence, the importance of keeping proper records of all invoices and receipts in your small manufacturing company cannot be over emphasis. Keeping proper records will go a long way to show that you are ready for growth.
6. Ensure that Due Process is Followed Especially as it Relates to Requisition
If you run an organization, part of the things you are not going to escape from is getting requisition from different departments. So, if indeed you want to grow your small manufacturing company, then you should ensure that due process is followed when requisitions are made. The truth is that if due process is not followed when your staff members make requisitions, then there is bound to be financial leakages that can hamper the growth of your organization.
7. Create Effective and User – Friendly Filing System
All successful and well organized organizations have one thing in common; they have user friendly filing system in place. This goes to show that one of the best accounting tips to adopt as a small manufacturing company is to create an effective filling system; a filling system that will make things easier for employees and the management. Just ensure that you have a reliable, safe and well labeled file rack.
8. Request and Study Your Account Statements on Regular Basis
Some business owners are so busy that they delegate a whole lot of business operations that they are supposed to be championing. The truth is that as a small manufacturing company, part of the accounting tips that you need if indeed you want to grow your company is to ensure that you request and study your account statements on a regular basis. Doing this will give you a clearer picture of the finance of your company.
9. Create Checks and Balances (Accounting Standard Operating Process)
Another very important tip that a small manufacturing company should adopt is to ensure that they create checks and balances in their organization. If you have effective checks and balances in your organization, you can easily checkmate leakages and fraud.
10. Adopt International Accounting Best Practices for Small Manufacturing Business
There is international accounting best practices for small manufacturing businesses and you will do your business a favor by ensuring that you adopt international best practices for small manufacturing businesses. In order to know international accounting best practices for your small manufacturing company, you should join relevant associations in your industry to get useful industrial tips as it relates to international accounting best for small manufacturing businesses.
11. Set Debit Order for Payment of Loans and Debts
As a business, you are not immune from collecting loans and credits from other organizations and vendors. The truth is that if you are a perpetual defaulter when it comes to paying back loans and debts, you will find it difficult accessing loans or credits in future because it will impact negatively on your credit ratings.
Sometimes it might not be that you don’t have money to pay back the loans received, it could be that you are very busy so much so that you forget the cut – off date that is expected of you to pay back the loan. So part of what you need to do to avoid this is to set debit order for payment of loans and debts. It will go a long way to improve your credit ratings and also make you eligible for future loans and credits.
12. Maintain a User – Friendly Payroll System
The fact that you run a small manufacturing company means that you will have employees under your payroll hence the need to have a payroll system in place. So, if you want to grow your small manufacturing company, then part of the accounting tips that you would need to adopt is to maintain a use – friendly payroll system.
13. Ensure You Pay Your Utility Bills as at when Due
Another effective accounting tip that you need to adopt as a small manufacturing company is to ensure that you always pay your utility bills as at when due. Some people might say that you have no business being in a business if you cannot pay your utility bills. This goes to show that it is very important as a business owner to always pay up.
14. Minimize Cash Requirements in Running Your Business
Another workable accounting tip that you need to adopt if you want to grow your small manufacturing company is to try as much as falls within your power to reduce cash requirements when it comes to running your business. Take for example, keeping as many overheads as variable as possible, managing stock holding to ensure that cash is not tied up in slow moving stock, or simply looking at reducing the monthly expenditure will go a long way to help your business reduce financial leakages.
15. Carryout Appropriate Cash Flow Forecasting for Your Business
Other effective accounting tip that you would need to adopt as a small manufacturing company is to always carryout appropriate cash flow forecasting for your business. Having a full grasp of your business means that you should be able to give an estimate of cash inflow for at least a month.
This is possible if you have successfully studies the pattern of your business. With that in place, you will be able to make plans, manage your working capital effect and ultimately reduce financial leakages in your company.
If you are able to take seriously these tips that have been mentioned, then you will be able to effectively manage your small manufacturing business effectively without having to break the bank.