Quick Tips to Get Your Business Finances in Order
Education and organisation are two of the most important factors in ensuring the financial health of your business. Money management is something that any business owner must keep on top of, no matter what industry or sector you are in.
Managing finances can be difficult for any small business owner, especially if you have no prior experience managing finances. It may seem to be a hassle and if not done correctly, you could find yourself adopting poor financial habits that will impact your business further down the line.
We have put together some simple steps that you can take to better manage your assets. But firstly, let’s understand the importance of cash flow within your business.
Cash flow is very important and refers to the movement of money into and out of your business. For example, if you have submitted an invoice but the client has not yet completed the payment, you may have the funds on paper but the business is without cashflow. With a number of expenses, you could quickly find yourself out of pocket in this scenario. The no.1 rule to business growth is to make sure you're always keeping an eye on your cash flow.
So, now we understand cashflow, let’s take a look at some tips to help keep you on top of your finances. So that you can focus on doing what you do best, running your business.
1) Pay Your Bills on Time, Every Time!
It's important that you pay all of your company bills on time, just as you do your personal finances. Late payments on credit cards and loans can easily add up.
Set up monthly reminders to ensure you don't miss any important bills. Profit margins for new businesses in particular are in most cases small, so you don’t want to risk losing any money.
2) Don’t Mix Business and Personal Expenses
Maintain a separate bank account for your company, away from your personal accounts. Combining corporate and personal assets is a recipe for disaster with unaccounted-for losses and financial complexities. Keeping the company's money separate will make calculating profits and keeping track of expenditures much easier.
3) Time your purchases
Transactions should be timed to avoid low cash flow conditions. Make no unnecessary purchases until you've paid all of your bills. Also, don't make any new purchases until you have enough money to finance them. That coffee machine can wait an extra couple of months!
You can also schedule your purchases to lower your tax bill. Consider buying tax-deductible goods (such as supplies) before the end of the financial year in order to claim them on your tax return.
4) Consider Hiring an Accountant
Keeping track of your accounting responsibilities is a never-ending job when running a business. Sometimes it is just easier to hire someone who knows the 'in's and out's'.
As your business is still developing, you will be able to file your business reports and send your tax returns. However, as the company expands, you may find that you have less time and that managing business accounts becomes more complex and time-consuming. At this point, it might be a good idea to consider hiring an accountant.
5) Create and Stick To A Budget
Creating and maintaining a business budget will help you manage your finances more effectively. Budgets help you determine your spending and revenue goals.
Your budget details all of the expenses associated with operating your business. Creating an annual budget for yourself will help you with money control, decision-making, and avoiding impulsive or unnecessary purchases.
A budget will also forecast how much profit the business will make. If revenue is lower than anticipated, look for ways to cut the budget down periodically.
A detailed budget is a necessary component of any business. Of course, it would also ensure that you don't run into cash-flow problems in the future, go into debt, or worst case scenario 'close your doors'.
In summary, keeping track of your financial reports is probably not your favourite part of running a company. Nevertheless, it's an important part that is required for growth, particularly at a time when so many small businesses are struggling.
Make your life easier by properly managing your businesses finances, allowing you to devote more time to new ideas and expanding your business.