Managing Small Business Finances
Managing the finances can seem like a daunting task to even an experienced business owner. For busy entrepreneurs who have to juggle multiple responsibilities this can quickly change from being a routine task to being a complete nightmare and something that’s either neglected or put off. It’s easy to see why, from expenses to record keeping, managing cashflow, ensuring your taxes and suppliers are paid on time, understanding payroll and trying to pay yourself.
One thing is for sure, there’s a lot to do. With the right tools and resources this entire process will be streamlined and put to rest. These tools and resources you adopt must be systems that work best for you and your business.
Set-up a Financial Calendar
One of the first tasks you should do is set up a financial calendar. This calendar will contain all the important deadlines, such as payroll, tax payments, reporting obligations and invoicing. This will take all your compliance and reporting obligations out of your head and on paper relieving unnecessary pressures. It will also provide you with a clear view of when you need to take action on specific tasks helping you to stay organised.
Document Management System
Set-up a document management system: It might sound a bit overboard but hear me out- how many times have you spent time frantically looking for that contract, that receipt, that invoice? Having a system in place for storing and organising documents both financial and non-financial can really help you to stay organised. In addition, with the use of technology, document management is a breeze. The next time you need to find something quickly you’ll thank yourself!
How to Stay on Top of Your Numbers
Set yourself a budget, here are a few that will help.
The first should be a breakeven budget. This will tell you what revenue targets you need to hit to break even. Set yourself a budget based on your operational activities. Build this budget such that it will enable you to make modifications, testing your breakeven position and what resources you will need to achieve your targets.
Once you have your budget, start tracking the budget and the respective line items. You will be surprised what corrective action you can take to make sure you stay on top of your numbers.
Bank Account Setup
Set-up a few bank accounts. Set up a bank account to deposit the business takings and to pay business expenses. Another bank should be set-up to deposit compulsory tax and staff. The final bank account you need to set-up is to deposit funds which are for your sole enjoyment. This will eliminate the risk of mixing personal and business income and expenses and when tax time comes around you will have the money in the bank.
Lastly, get yourself a business advisor and an accountant. Keep these separate. An advisor will help you with personal and business issues and will use the accounting information produced by the accountant to help guide you on your overall business goals. Most importantly, the advisor will keep you on the road map leading you to your desired future state. Your accountant will keep the numbers organised.
Another resource you will need is a bookkeeper. A bookkeeper will take care of the numbers at the nitty gritty level, including payroll. Having someone on call who looks after the invoicing and the nitty gritty of the payments will be a dream. The greatest asset of the bookkeeper is that they will grow as you grow. Remember you can build, buy or borrow. Contracting a bookkeeper is a sound move.
Just imagine the amount of time you spend managing your business finances each day. Whether it’s issuing invoices, creating spreadsheets, reviewing budgets and cash flows, or any other number of seemingly countless tasks, it can add up quickly. Let’s say you spend just 2 hours a day on these tasks, by the end of the week, you’ve already invested 10 hours of your valuable time and energy. And when you take a look at it over the course of one year, that’s a whopping 480 hours! Imagine the amount of time you’ll spend on similar tasks in 2, 3 or even 5 years, just the thought of it is mind-boggling.
Don’t hold back with this appointment.
If you’re finding that the amount of time you’re spending on financial tasks is decreasing while your revenue is increasing, it’s a clear indication that you’re headed in the right direction. This means that the financial decisions you’re making and the systems you’re implementing are working effectively and are providing you with sufficient space for you to focus on growing and scaling your business.
However, if you feel like you’re still spending a lot of time on finance admin and your revenue isn’t increasing, it might be worth taking a step back and asking yourself if you’re spending your time and energy wisely. Are you using the right tools to manage your finances? Are there areas where you can improve efficiency and streamline your financial processes?
It’s important to remember that time is money, and your time is valuable. By using the right tools and resources to manage your finances, you’ll be able to free up more time to focus on growing your business and generating revenue. This can help you achieve your financial goals and create a more sustainable business model.
Many platforms also come with built-in reporting features that allow you to generate financial reports, such as income statements and balance sheets, which can be useful when preparing for tax season or applying for additional funding. You’ll find that having easy access to historical financial data can be incredibly empowering.
Don’t forget at the start to set a budget. The financial reporting tools will allow you to compare your actual trading performance with what you have budgeted. Don’t forget you should also set-up your budget so that you can make changes. If you are doing well, then you can make the adjustments you need. If you are performing poorly compared to budget, then you can start to make changes to your business so you can get back on track!