Finance and accounting aren’t everyone’s favorite topics, but they matter a tremendous amount in the food industry. In order for an organization to have success, it’s imperative that they understand how to stay organized, minimize costs, and steer clear of financial issues.
Five accounting tips and tricks to consider
Nobody wants to spend their days thinking about accounting, tracking expenses and creating reports. If you’re looking for a way to streamline some of these time consuming processes and want to simplify your approach to accounting, you aren’t alone.
Let’s review a few tips and tricks that other leading organizations in the food industry rely on to maximize their resources.
1. Keep a record of everything
In order to maintain accurate and dependable accounting reports, you absolutely have to keep impeccable records. Your records are the foundation of every other accounting task you take on, so make sure you’re giving them the attention they deserve.
If you’re still trying to track expenses with little paper slips and receipts, you’re bound to lose or misplace some of them. (Not to mention, the ink on receipts often rubs off over time). A better option is to copy them onto a full A4 paper, make a note of the reason for the expense, organize by date and then categorize by expense type.
2. Try setting longer payment terms
In the food industry – particularly if you operate in a business that’s historically variable from month to month, such as bars and restaurants – 30-day payment terms can put a lot of undue stress on your company. Thankfully, these short payment terms are no longer considered standard.
If cash flow is an issue, consider negotiating better terms up front. You’d be surprised by how many vendors allow for 45-, 60-, or even 90-day terms. This extra breathing room can help remove unnecessary pressure and free up cash.
3. Get paid upfront
While you extend your accounts payable terms, it’s smart to speed up the accounts receivable process by refusing to give out credit to any customers. This may seem harsh, but it’s actually becoming much more commonplace. Credit isn’t a right – it’s a privilege. Accept credit cards and other forms of payment so there’s no excuse for customers to delay.
If you find that your customers really can’t pay in full upfront, then you can give them a little wiggle room. Other options include accepting 50 percent upfront and the other half at the end. Another strategy is to conduct an even 1/3, 1/3, 1/3 split across three short periods. But regardless of the method, you should be getting something upfront.
4. Bill on time
One of the biggest mistakes businesses make is failing to bill frequently enough. Many bill monthly – and some wait even longer. But did you know that large companies often bill daily, instead of waiting until the end of the month? This may seem excessive, but it actually correlates to faster accounts receivable and fewer cash flow issues down the road.
5. Invest in business software
The biggest problem a lot of businesses in the food industry have is a lack of insights. They may have an accounting software or system, but it doesn’t do a good enough job of communicating with all of the other tools within the company. The solution to this problem is to invest in integrated business software that is used across departments
With integrated business software, you get accounting features built in. But more than that, you get a full-scale resource management system that also includes sales, production, warehouse management, recipe management, lot tracking and food safety. When all of these resources are managed under one system, accounting becomes much easier.
Learn more about integrated business software
For more information on integrated business software and how industry leaders in food manufacturing and distribution are utilizing this software, check out this report from the Aberdeen Group. Aberdeen created a report outlining the 7 secrets that help food companies toward operational excellence.