A balance sheet is like a thermometer for SMB owners that provides a reading on the health of their business and ignoring it can be fatal to a business as it records all the assets, debts and shows the ‘net worth’ of the business at any given time. A company’s balance sheet gives a quick sense of the business’s health and liquidity as well as its ability to generate cash flow but it is only when the balance sheet is healthy.
So the question is, what should an SMB owner do to improve their balance sheet and make it a healthy one?
In this blog, we will highlight three helpful tips for SMBs to improve their balance sheet
- 1. Managing Accounts Receivable
A business may receive most of its receivable payments within the invoice period but some accounts become overdue while others even become bad debts. Tightening credit control procedures such as reducing credit limits for customers who have been late in the past or refusing to pay due to financial difficulty, reduces the amount of overdue invoices and increases the business’ cash flow. Also, sending automatic email payment reminders, following up with late payments and offering discounts for settling invoices early help SMBs to better manage accounts receivable.
- 2. Paying Close Attention To Inventory Control
SMBs carrying too much inventory on their balance sheet can create some very significant risks such as the risk of inventory becoming obsolete, damaged or lost. Holding more inventory than needed results in the business’ capital getting blocked. This blocked capital could be better utilized in generating cash flow or improving the business’s financial stability.
- 3. Accurate & Timely Bookkeeping
Many SMB owners have a tendency to think they have to handle everything themselves. However, if there is no accurate and timely recording of all the assets, liabilities, equities and expenses, it can seriously disturb the balance sheet, limit the owner’s ability to know the net worth of their business and prevent them from being able to make effective and profitable decisions which can ultimately cripple their business.
SMBs should partner with an outsourcing service provider who can free them up to handle the monotony of number crunching and work on the value-add tasks which will help them improve their balance sheet and overall business
Whether an SMB owner faces an unmanageable financial reporting situation, needs guidance on tax planning, or is facing challenges in accounts receivable and accounts payable, Quatrro is committed to helping them overcome those hurdles through its cost-effective financial and accounting outsourcing solutions and wide range of other affordable business support services tailored specifically for SMBs.