Do you find it difficult to manage your business finances? While it may seem tedious and often boring, keeping your finances in order is extremely important.
Accounting is very important in businesses of all types, but it is often a priority for small business owners, especially to take care of all the other tasks related to running and managing day-to-day operations. However, accounting should not be treated as a later thought.
It helps you determine where your business is going, and knowing exactly what your income and expenses will be like allows you to make more informed business decisions. Keeping your financial records also facilitates the management of tax returns and payslips.
Don’t try to do it alone. Use the talent and tools at your disposal.
Here are FIVE tips to help you keep your business finances in order:
1. Separate your personal and business finances
The inevitable mixture of your personal and business finances creates confusion. It may seem appropriate to load everything onto a card, but in the end, controlling your spending will be more complicated than necessary.
Start by opening a separate bank and credit card for your business. Due to the ongoing monitoring and measurement of your finances and for tax purposes, this method will make it difficult to classify your quarterly or annual transactions.
It will also remove the assumptions from the equation. If you want to be successful in business, you need to be able to monitor and track your KPIs. You need to know the score and some of the most important things include cash flow, expenses, income, profit, etc.
Having a separate bank account for business purposes makes it easy for you and your accountant to see how the money is spent. If you choose to use your personal account for business purposes, you can ignore important business transactions.
Going forward, be sure to differentiate between your business and your personal finances. It could simply mean setting up separate credit cards and checking accounts associated with the two.
We recommend that you only rely on credit cards for all business transactions. This is because credit card statements give you an automatic and easy way to track your spending.
Cash payments can be easily ignored. Many business owners struggle to stay on top when managing receipts. Neglected cash payments can lead to inaccuracies in cash flow management reports and poor forecasting.
2. Choose the accounting software that’s right for your business
When it comes to accounting software, there are several solutions. Think of Xero, QuickBooks, and Freshbooks. The best online accounting software will depend on your business, and there are several options to consider before making a decision.
If you haven’t migrated your financial data from desktop software to the cloud yet, this should be your first priority. Cloud-based tools allow you to view information in real time and are available anytime, anywhere. The ability to instantly control your finances gives you, as an entrepreneur, a lot of flexibility.
If you’ve ever gone for an online solution, make sure it’s right for you and your business. Now more than ever, there are many options to choose from and if you are not happy with the current service, you can always switch to another platform that best suits your needs.
3. Hire a professional accountant
Most people try to save money or cut costs by doing their own bookkeeping. If you are having trouble managing your finances, it is time to consider hiring a qualified accountant.
Many entrepreneurs tend to try to figure it out for themselves. However, as with legal matters, the individual elements of small business accounting are generally not directed by the business owner.
While it’s easy to give up working with an accountant, it can help you save money in the long run. You will have the freedom to work on important tasks that will keep your business running while your accountant deals with the numbers in detail.
4. Be organized and plan ahead
The tips above should help you organize your finances. Plus, keeping track of your finances and projecting your future income and expenses will help you make better long-term decisions about your business.
Planning ahead can be a challenge without this information. If you don’t look to the future of your business, you might be surprised. If you want to keep going and stay ahead of the competition, you need to plan up to 10 years in advance.
If you have an advantage on the ball, you can mitigate unpleasant surprises. Although unforeseen expenses will increase if you have practiced conservatism
in your spending, you shouldn’t face major problems.
5. Look to the future
When writing your monthly financial statements, use your company’s financial trajectory to forecast it. It may simply involve determining future costs such as taxes or legal fees. It can include more detailed plans for growing the business, including planning for new employees and increasing rents.
Forecasts thus allow efficient use of existing assets. It can also help you reliably plan other important milestones in your business growth. Efficiently analyze your financial data every month. Data-driven analysis can provide smart investments.
In reality, many business owners don’t watch their finances. Whether you know it or not, it can mean losing opportunities to minimize your costs and maximize your profits.
Make an effort to make it easier for you to organize your finances as you go. This will ensure long term stability and durability.