Just because your business might be on the smaller side doesn’t mean that you can get away with not having a professional and organised approach to your finances. From improper record-keeping to failing to keep up with your cash flow needs, there are a lot of seemingly minor mishaps that can lead to big money trouble down the line. For that reason, we’re going to dip into some of the crucial money management choices you should make early, and how keeping up with them can keep your business financially healthy.
Make sure that you pay yourself
You might go into business with the intention of getting along on what savings you can, while allowing all of the income from the business to be invested back into it. That’s rarely a good idea, however. Paying yourself a wage gets you more invested in the prosperity of the business, for one. If you’re not making sure that all of your needs are met and providing yourself with some level of financial security, then you could end up dealing with financial stress that will affect how you run your business. Leading your business into financial hot water because you’re feeling desperate about your own finances is not an outcome that anyone wants to deal with.
Ensure that your business plan is financially accurate
If you’ve created a business plan as a means to convince funders to give you the money that you need, and for no other reason, then you could be under-utilizing it. A business plan should act as a plan that the business can follow, which includes a financial plan for how you go forward. As such, making sure that the numbers are accurate when it comes to estimating business costs, as well as what kind of revenue you need to keep the business growing can help you see how much you are on the “right track.” This can help you adjust your plans as you go, or know that you’re doing as well as you should be.
Keep records and watch your books
You don’t need to be an accountant to have a good financial sense about your business. However, you should ensure that you’re keeping records of all the money that goes in and comes out, as well as tracking your cashflow to make sure that you have a healthy reserve of money to rely on for expenses, wages, and so on. If you’re not able to spare the time to track all of these financial details yourself, then you should look at hiring one of the many bookkeepers that can do it for you. They can be especially helpful for when tax season is coming up and you have to start thinking about filing all your records.
Get a little extra tax help
The more your business grows, the greater the chances that you’re going to be able to get a little more back on your taxes. If you’re not taking advantage of the tax deductions and exemptions that are available to you, then you could be paying a lot more to the tax man than you should be. The best way to file taxes is with the help of a chartered accountant. Unlike bookkeepers, you don’t need an accountant throughout the year. They can be helpful for getting together once tax season approaches, devising a strategy for how you’re going to file your taxes, and making sure you know the options that are available to you without triggering the risk of a time-consuming audit.
Track any payment deadlines
It happens all too often that a payment deadline will sneak up on you and bite you in the rear. You might think, at the point of setting it up, that you’re going to be fully prepared for any accounts payable that you have going out. However, if you end up forgetting about it (which is not very unlikely) you can find it can put you in a precarious position if you haven’t set the money aside in time, which can lead to problems with creditors, vendors, and impact your business. Record when payments are due and keep that record somewhere visible (even a simple financial calendar on your wall might do the trick.)
Set your standards for invoices and payments
One common mistake the business owners make when they start sending invoices is that they can often fail to account for clients who will pay late (or sometimes not pay at all without prompting.) These clients are going to be a reality of doing business and one that you should work to accommodate. You can do this by making sure that payment dates are included in any contracts you have them sign, as well as their responsibility for late fees if they fail to repay within that time. Other ways to obtain payments from late-paying customers is to make sure you’re using invoicing software that tracks all payments owed to the business and even automatically sends out reminders to those who need them.
Avoid mixing the business and the personal
One of the reasons that you want to make sure that you pay yourself a wage is that you’re not tempted to raid money from the business when you need it for personal expenses. In fact, you should aim to keep these two facets of your life as separate as possible. It can lead to tax issues you might have to explain down the line, as well as making you more personally liable for any financial trouble or debts that the business gets into. If you need to, set both a personal and a business budget, as well as a separate business bank account to make sure that you don’t accidentally dip into it.
With the tips above, you can make sure that your business is financially secure, or at least isn’t bleeding money from problems that you don’t know about. Adopt these practices early so it’s easier to keep up with them as you grow.