Article summary: Bookkeepers see a business’s numbers daily, weekly, and monthly so on, the bookkeeper is often the first to recognize that there is going to be a cash flow problem or that there are patterns in cash flow problems. That is why bookkeepers will often be the first to recommend to the business owner that a line of credit might be a good idea to get in place.
Why Bookkeepers Usually Recommend Setting up a Business Line of Credit Ahead of Time
1. A business line of credit is ideal for managing uneven cash flow because your business has already set up the line for emergencies or opportunities. Because your bookkeeper is always reconciling your books, they are often the first to recognize accounts receivable gaps or poor account receivable turns. This form of short term business financing will help you to balance your cash flow statements. It will also help you avoid costly overdraft fees and potential fraud. Every business needs to have a backup plan for working capital and a line of credit is specifically designed to be that safety net when working capital is needed.
2. Bookkeepers are in the perfect position to respond proactively. They are on the front lines when it comes to your numbers. Consequently, they are usually the first to notice discrepancies, troubles and repetitions of predictable problems. As a result, they will often suggest that you get help before such issues hurt your business. Bookkeepers can often tell when a business should set up a line of credit. It’s typically due to common problems like the seasonality of a business or delays in when clients pay their bills. There are also times when additional hiring will be needed, or many other cash issues.
3. Setting up a line of credit can often help make the best use of your bookkeeper’s time. By fixating less on uneven cash flow issues, bookkeepers can have time to seek out and improve inefficiencies in your back office and find new solutions to old problems, allowing your business to use the line of credit less.
4. The number one reason most sighted for why someone uses their line of credit is because of payroll. Most business owners and nonprofit organization executive directors do not know that it is actually illegal to not pay your staff on time. If your state or the federal government learns that you delayed paying your staff get ready for a heap of problems.
Here are some other suggestions for making bookkeepers valuable partners in the success of your business:
How to Use Bookkeepers for Maximum Advantage
Have a full-time, in-house bookkeeper. Some companies rely only on freelance bookkeepers or accounting software programs to handle their accounting needs. This is especially true for small businesses, where space, funds and personnel may be in short supply. However, there are numerous benefits. For instance, full-time bookkeepers will work only on your business. Therefore, they will quickly notice when something is not right or where adjustments need to be made. Having thorough, subjective knowledge of your business as well as the ability to think about the options that will work best for your individual needs is something no program can do. Also, you will know that your finances are accurate and well-managed so you can focus on other matters.
Schedule regular monthly meetings with your bookkeeper. Often, a business will see bookkeepers in a limited role. In truth, bookkeepers can provide advice and counsel that can significantly impact your bottom line. For instance, they can help you separate your business finances from your personal ones. Such an action can help you understand how much money your business truly makes.
Consider getting a line of credit set up now. Whether it’s a commercial/local bank or Financing Solutions it will make sure that if you have a cash flow issue, you have a backup plan. It’s no secret that the better your finances, the better your business runs. If you constantly make bookkeepers stressed out because your business is short on cash, they will leave. So will your other employees. A line of credit is really short term small business funding and it is mostly designed to be used so you can make payroll and handle other daily expenses with ease and improve the performance of your business now and in the future.