Managing your business finances is one of the most important challenges that you face as the owner of a company. No matter how big your organisation may be, whether you run a small startup or whether you operate a market-leading corporation, you must strive to keep your finances in order on a daily basis. Should you ever, for whatever reason, find yourself adopting bad cash-handling habits, you could end up seriously damaging your business’s brand as well as your ability to provide your customers with a level of service befitting of today. If you’re seriously careless when it comes to handling your company cashflow, then sooner rather than later you could end up facing that dreaded B word, bankruptcy.
If you feel that your current finance management strategy is putting your business in danger of going bankrupt, be sure to heed the bookkeeping basics listed below. If you put them into practice, you’ll no doubt find it easier to manage your money in a highly organised and effective fashion.
Here are four things you must do to manage your business finances:
Get your personal finances in order
You’re going to find it mightily difficult to manage your business finances if your personal finances aren’t in order, that’s for sure. Should you, for whatever reason, find yourself struggling for cash in your life outside of the office, you’re going to be very tempted to dip into your business finances as and when your bank account is at its lowest ebb. This is perfectly legal, as your business’s cashflow is still your money at the end of the day. This is not, however, a practical course of action to take, simply because it’ll constantly hold your company back from actually consolidating the profit that it manages to turnover.
To ensure that you’re not tempted to dip your hands into the cookie jar in this instance, simply do your utmost best to get your personal finances in order. Whether this means taking out a small loan so that you can make an important payment deadline, whether this means boosting your credit score, or whether this means accessing a ‘rainy day’ savings account — whatever you need to clean up your personal finances, go ahead and do it. Your business finances will be far better off if you do.
Enlist the services of an accountant
Unless you operate in the financial sector yourself, you won’t have the industry expertise that are required to handle your books. Your lack of experience in this instance will more than likely result in you missing crucial pieces of information with regards to your profit turnover, and doing that could end up landing your business in serious financial (or even lawful) trouble somewhere down the line. It is for this reason why you need to enlist the services of an accountant. This professional will audit your financial records, they will analyse your cashflow data, they will keep on top of your tax returns/rebates, and ensure that your workforce get paid in full and on time.
If you want to align yourself with an accountant that is capable of providing you with the bespoke level of service that you require, be sure to put the following advice into practice during your onboarding process:
• Understand the different sectors of accountancy (business advisory, record-keeping, tax advice, and auditing) and hire a professional who specialises specifically in the field(s) you require assistance in.
• Study the professional services that each of your referrals have the capacity to offer. Some will be able to offer management consulting, others will offer estate planning, and others might provide bookkeeping as standard. Again, it all depends on what specific assistance you are in need of.
• Take the personality of your referrals into account. Does their work ethic, working style, and company culture align itself with your own?
• Request information regarding the fees that each of your referrals charge.
Organise your financial data
Getting and then staying organised when it comes to your financial data is essential. Implementing a system when it comes to opening, filing, and then categorising important documents pertaining to your financial data will allow you to tap into whatever information you need, whenever you need it. This is especially important when it comes to paying your taxes, as your financial information needs to be up-to-date and lawfully correct if you’re to pay the exact amount of money that you owe (and not a penny more).
To organise your financial data, you should:
• Draw up financial plans that adhere to your current cashflow capacity
• Keep your important financial documents in order
• Use a calendar app to help you remain on top of your incoming/outgoing payment deadlines
Draw up a budget
With help from Inc.com, drawing up a budget is the final thing that you must do in your bid to keep on top of your business finances. Preferably, you want to create a budget that helps you to stop wasting your profit on unnecessary resources. At the same time, you don’t want your budget restricting you from purchasing whatever tools you need to keep your company afloat on a day-to-day basis.
To set a targeted and effective budget in this sense, you must:
• Work out your monthly income (monthly earnings, product sales, investment income)
• Determine your fixed costs (workspace rent/mortgage costs, utilities, Internet, government fees, insurance)
• Take your variable expenses into account (raw materials, commissions, transportation, printing services)
• Account for instances of isolated spending (furniture, office supplies, software, employee perks)
With all of this information at hand, you will find it much easier to determine how much you can afford to spend on all the resources that are crucial to your daily work-flow. More importantly, you’ll have a better idea of what it is you need to do in order to cut your unnecessary spending.
Should you put all of the above advice into practice, you will no doubt find it much easier to manage your business finances.