Black Friday is the single weekend that can make or break a SMB or small business for the year. The unofficial start to the Holiday buying season is quickly approaching, and this may be the last chance to take a hard look at your business’ books before the rush.
By Black Friday, most small businesses have made their necessary adjustments to get ready for the Holiday Season. You’ve hired additional seasonal employees. You’ve rented or purchased new equipment if you have a retail space. You’ve ordered more merchandise to have on hand since delivery times during the Holiday Season may be slower. However many businesses often forget to give the same attention to their books. Liberty Accounting has some helpful tips to keep your business in the black during the Holiday Season:
Accounts Payable & Receiving
As a profitable best practice, SMB owners should be collecting outstanding balances at a minimum of within 30 days of receipt of the items. When you do not collect in a timely manner, you are essentially giving your customers an interest-free loan.
However, businesses should be paying on their accounts within the terms you have agreed upon with your vendor. As a small businesses, it is critical to be in good credit standing with their vendors because there may be a point in time when additional credit is needed or more time is needed to pay an invoice. Businesses with good payment histories may be given a more favorable allowance in these instances.
Accounts are Reconciled
Accounts need to be reconciled to have a firm understanding of how much is needed to end the year in the black. This helps to gauge whether your SMB has the ability to handle additional emergency purchases if a popular product sells more quickly than you expected or if you need to hire an additional employee.
As a small business owner, you know that you must know your profit margins. To be competitive, you need to have sales on your products, so know what your books can handle. Look at cost models – if you sell product x for y, and sell 15% more product, your cost is still the same, but make sure your profit margin will still cover your added expenses for the Holidays.
Remember that come tax season, charitable contributions may help you lower your tax bill. If you have products a charity can use but aren’t selling well, consider donating them and writing the value off. Consider a food drive for a local food bank, or even giving percentages of sales to a local charity. Whatever charity you can donate to, make sure they are a qualifying current 501(c)(3) organization with the IRS.
The term “Black Friday” was used because the weekend meant a business was going to finish in the black (profit) or in the red (loss) financially. So using the tips above, or the tips and tools available here will help make sure your business finishes the year in the black.
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