Getting your finances in order can seem like a daunting task, but creating an organised system and seamless process for your business finances can help you foresee any financial challenges and allow you to invest more in growing your business.
Here are our top 10 tips to help you organise your business finances and give you much needed peace of mind.
1. Create a cash flow plan.
Good cash flow planning is essential to the success of a business. It’s important to remember that cash is not the same as revenue, and you need to be able to pay your bills while waiting for payments from your customers.
Create a plan by looking at the income of your business on a monthly basis and balance these against current and future costs. This forecast will help you understand if you need to find additional income. Look at how your forecast compares to your actual cashflow and amend your plan as needed.
2. Track all of your expenditures and review them regularly.
It’s important to plan for expenses and audit them regularly to ensure you’re not spending too much on unnecessary costs. Could switching utilities providers or automating certain processes help you save money? Reduced outgoings means better profit margins and more money to invest in your business.
3. Have a tracking sales system.
Set up a sales tracking process to help you better manage the different stages in your sales process and make improvements when necessary, from lead to quote and through to sale. Depending on your business’ size and complexity, you can use traditional spreadsheets or an automated sales tracking CRM software to log activities and manage your pipeline.
4. Open a bank account for taxes only.
Setting money aside for tax obligations in a separate bank account is good housekeeping. It helps you save time on admin, it reduces the risk of dipping into your tax pot and it can build up interest overtime.
5. Invest in a bookkeeping and accounting system.
Take advantage of digital bookkeeping and accounting programmes to save you hours of office admin. There are many free or low-cost options available such as QuickBooks, Wave or Xero, some with a mobile app that can help you log expenses on-the-go. They could even help you find out about tax benefits you may have missed out on otherwise.
6. Have a separate business bank account from your personal bank account.
Make sure you pay yourself regularly (this may be weekly or monthly), taking into consideration your taxes and overheads. Think about how much you want to earn. Accounting software can help you work out your salary.
Keep a separate business bank account to make managing profitability and expenses easier. Although sole traders are not required to have a separate business account, by separating business and personal finances, when it comes to tax time, there will be less transactions to manage and less headaches along the way.
8. Automated your invoicing process.
Many accounting software providers enable you to automate the processing of invoices and purchase orders. This helps you send invoices quickly and track their status in the payment process. This also means no more time wasted chasing unpaid invoices, the software can do it all for you.
9. Review your services/ product prices regularly.
As with your accounting processes, you need to regularly review your product or service pricing in order to ensure your business is profitable and competitive in the market. Considering different pricing tactics could help you attract new customers.
10. Have a management account prepared every quarter.
Management Accounts are a set of financial statements prepared periodically and typically including profit and loss, balance sheet and a cash flow statement. Your bookkeeper or accounting software provider can help you with this data. Preparing accounts on a quarterly basis allows you to understand the financial position of the business and make informed decisions as a result.