It is essential to keep close track of your finances if you are a small business owner. This is because it helps keep a good cash flow. It also gives you visibility over potential debt. Whilst making sure you have enough money to invest in your business. To ensure it continues to grow into the future.
Managing day to day finances
- Effectively manage your accounting. It is vital to keep track on income and costs. As such, you should invest in accounting software. Or if you feel you cannot manage this, consider hiring a book keeper
- Keep track of expenses. Although these may be frequent, this is useful to do. Because it allows you to keep a close eye on where your money is going
- Predict future finances. It is important to make projections about your businesses finances. So that any potential future issues can be identified and action plans put in place to deal with this
- Tighten up invoicing. Ensure that invoices are sent out straight away once goods or services have been provided. Make sure that your customers pay the invoice within the specified period. Ensure that any sent invoices are tracked to ensure that missed payments don’t occur. And make sure that invoices and payments can be cross referenced so that they can be tracked easier
Keep business accounts separate from private ones
- Keep your business account separate. Mixing a business account with a personal account is a recipe for disaster. Calculating tax will be totally confusing. Keeping track of losses will be a nightmare. And keeping a track of profit and expenses will seem impossible
- Keep accurate records of business loans. It is a good idea to pay back the directors loan first once your business starts making profit. Then tax can be paid on the remaining profit
- Ensure you draw a salary. This makes sure that the profitability of your business is tested. Whilst providing a safety net for unknown expenses
- Be frugal. It is a good idea to keep your initial salary low. However if the government offer any benefits, it is a good idea to make use of them. This will give you more flexibility in the future if needed
- Keep travel costs minimum. Treat travel costs as simply a place to rest for an evening. Do not get caught up in paying out for luxury food and accommodation. This can be a costly and wasteful use of money. Which also sets a bad example to your employees. Instead, treat travel costs as if they where coming out of your own pocket
Keep bigger business issues at the forefront of what you do
- Avoid overpaying for legal services. Make sure that your lawyer is fully briefed on what you require from them. By explaining your expectations from day one. Also specify how they will be paid. And whether it is possible to pay only once the work is completed
- Consider DIY legal kits if these costs are proving to be too expensive
- Don’t expand too quickly. Expanding with little thought and uncertainty may end in disaster. As potentially, a significant amount of money could be lost
- Do marketing and PR in-house. Create your own PR and marketing strategy. This will make sure that you are completely focussed, and your efforts are intentional
- Consider renting rather than buying. Buying a business premises can be costly and ties you down. Renting normally has easy opt out terms. Meaning that if you want to expand or re-locate, this is easier than buying
- Make an early application for a loan. It is good to make an early application for a loan. Because if your business got into difficulty in the future, it will be more difficult to acquire one. Vitally, such a loan could be a lifeline. Because it could allow you to expand. Or provide you with vital cash when you need it
- Ensure you have enough capital. It is common for some new businesses to struggle to even get through the start-up phase of their business. In order to prevent this, make sure to have three months of living expenses saved, as well as three months business expenses
- Prevent cash flow blockages. Make sure not to spend too much before you have received any revenue. Large, un-necessary purchases such as sign writing, business cards or marketing can have a detrimental affect on cash flow. And potentially put you in a difficult situation
If you are a small business owner, it is essential to keep tight rein over your finances. In order prevent putting yourself in a situation where you have little cash. Having good control over finances also ensures that you have strong visibility over when you may experience debt. Whilst also offering a better chance of having more money to invest into the business. And tighten future growth.
In this article, we have mentioned several techniques that can help you successfully control your finances within your small business. These include:
- Effective management of day to day finances
- Keeping your business account separate from your private account
- Keeping a close eye on larger business issues. E.g. legal and marketing costs
Do you need help managing your finances within your small business?
Why not book a 45-minute chat with Angelina Bell. As an experienced business coach, Angelina has helped numerous businesses be more successful through coaching and advice relating to financial matters.