Getting to grips with ongoing financial matters can be an an intimidating and challenging task for any new business. In fact, studies have found that close to 70% of people “ named some form of a fear of money as the thing that scared them most” more even than death.
But no matter how much you might wish it, ignoring your finances or putting off doing them won’t make them magically go away and sort themselves out. Being smart about your business’s finances will ensure that dealing with them never gets daunting, and that the process becomes as simple/easy as possible.
So here are a few quick tips on what NOT to do when you’re dealing with your company’s finances so that hopefully it will seem much less frightening.
Don’t fall behind with the latest accounting software
According to London based chartered accountancy firm 3 Wise Bears, using the latest cloudbased digital accountancy programmes is “The most advanced and comprehensive way for small business owners to take control of their company finances”.
By making the most of available cloudbased software, you can manage your finances more effectively by automating things like invoices and staff payroll. Some programmes also offer you the opportunity to get real time alerts and overviews of your business’s finances, so you’ll be far less likely to get caught unaware by any changes to your business’s financial situation.
And intelligent accounting software can be used in tandem with a professional accountant, therefore giving your business the best of both worlds.
Just because your business is seeing a lot of cash flow, that does not necessarily mean that your profits are soaring quite as high. While a large influx of cash will naturally be very encouraging, you must never forget to take the costs of running your business into account.
After all, the same amount of cash flow which led to substantial profits one year will not necessarily do the same in the years that follow. A business’s earnings must invariably go towards other internal expenditures before you can be left with your true profit.
As you likely already know, things like staff and premises cost money, and unless you’re independently wealthy, you won’t be able to pay for these things out of pocket.
Therefore the money must come from the business’s earnings. And when dealing with your finances, you must understand that as a business changes and grows, so will the cost of running it.
In addition to this, credit transactions are recorded as income for your business before the cash is received. Some of your expenses and/or earnings might be recorded before cash is paid, and some might be recorded after the cash has already been spent, so you must always make sure that you understand where your business stands in terms of both cashflow a nd profits.
Steer clear of unclear payment terms
The manner in which your business handles both ingoing and outgoing funds cannot be unclear or vague. This is important both from a financial and a legal standpoint.
For example, if your payment terms haven’t been standardised yet, then you must rectify this by establishing a clear, uniform payment policy with your lawyer to be used within all of your transactions immediately.
The payment terms must also fully visible on any relevant work orders, contracts, and account statements. Having a transparent, standardised payment policy can help to ensure that all of your business’s transactions are completed to the same lawful standards.
At best, unclear payment terms could make you appear disorganised and sloppy. At worst, unclear payment terms could make it easier for you to be taken advantage of, and they could potentially make you vulnerable to lawsuits; both from your staff and from those you do business with. Therefore your payment terms should be clear and easily accessible to anyone you employ and do business with.
Don’t forget your personal finances
A healthy separation between your personal finances and your business’s finances will do a lot to ensure that, if your business hits a rough patch, the effect that it has on you personally will be minimum.
But while your personal and your professional finances should not be treated as one in the same, they are still very closely linked. Therefore you must never neglect your personal finances in favour of your business’s. Make sure you keep and maintain all of the good habits that got you this far; keep saving, live within your means, invest in all the appropriate insurance and do your best to stay out of debt.
Don’t feel like you have to go it alone
While it is imperative that small business owners be personally knowledgeable of the financial state of their business, and involved in it’s upkeep, it’s important to remember that noone can become a financial expert overnight. There are plenty of options available for businesses who need a little help managing their finances.
For example, there’s a good deal of “government backed support and finance for business”; including mentoring and consultancy. You might also consider hiring outside help see you through any particularly challenging financial periods for your business.
Freelance accountants are by their vary nature available to you on an ad hoc basis, meaning you have them on your payroll only as long as you need them.