How to Eliminate Human Error From Your Accounting: It’s hard to believe that 82 percent of business that shut their doors cite a poor understanding of management of cash flow as the primary reason. Even profitable businesses run into cash flow issues.
“The thing that sinks entrepreneurs again and again is conflating profit with cash flow,” Accountiful founder Bill Mosca explains. “Just because a business is profitable doesn’t mean it’s got sufficient cash flow to sustain itself.”
Money coming in is great, but there’s more to it than that. As most business owners will tell you, a lot of money goes out too. Utilities, rent, salaries, suppliers, lawyers, taxes, etc.—the list goes on. It takes a lot to keep a growing business moving in the right direction.
You’ve got to keep the cash moving. Financial forecasting could be the lifeblood of your business, especially if you want happy employees, a content landlord and an audit-free year. Cash flow is an umbrella term that covers a lot of different parts of your business. Ultimately it’s about balancing income with expenditures.
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As we discussed in our cash flow ebook, short- and long-term forecasting is the crux of it, but there are many processes you can implement to optimize the parts of your business where cash is moving.
Your First Priority: Eliminate Human Error
Several studies have found that greater than 90 percent of car accidents are caused by human error. An article on Stanford University’s Law School site points out that while humans can be incredible drivers, they also much more likely to be distracted, make poor decisions, fall asleep at the wheel, etc.—the list of possible mistakes goes on.
Most entrepreneurs could be great accountants too. They have the skills, the know-how, the ability to soak in the necessary knowledge, but they have too many other things going on. And rightly so—finances aren’t the only component of a successful businesses. It’s important to recognize when you don’t have the time or bandwidth to take on yet another task.
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Software compensates for quite a bit of the human error involved in bookkeeping. If you don’t want cash flow to slow down your business, let a computer do as much as possible. Instead of building a dashboard, just open an app on your phone. Instead of scouring your email to see who forgot to pay their invoice, just peek at your invoice queue. Don’t make accounting harder than it needs to be.
QuickBooks is built to make finances accessible. Here are just a few of the ways you can use to keep cash moving and—more importantly—keep your attention on other things.
1. Track Unpaid Invoices
When invoices go unpaid, human error is almost always to blame. Sometimes business owners forget to even send invoices (this happens all the time). Often, customers forget to pay them. There is enough room for error that invoicing requires a system to keep track of things. Maybe you have an Excel spreadsheet where you keep tabs on accounts receivable, or maybe you’ve turned to some cloud accounting software.