When you’re running a business, understanding your money situation as best as possible is always crucial. Money is the lifeblood that keeps the business going after all, and it’s crucial for your growth, aside from simply covering your costs. But a business’s money situation can be a complex affair, and it’s not easy to see how your business is doing by looking at your bank balance alone. Here, we’re going to look at what you can do to make sure that you have a complete understanding of your business’s money situation from top to bottom.
Separate your personal and business finances
First of all, you should make sure that there’s no confusion as to what money belongs to you or your business, nor where you are purchasing from. If you’re running a sole proprietorship or count as self-employed, then opening a business bank account is always recommended. You should be drawing a set salary for yourself rather than using your money for business and personal use interchangeably. Setting your business up as a limited liability company requires you to establish some level of separation, and also protects your personal finances and well-being from the state of the business, so it is often recommended for new business owners, as a result.
Stay on track
You don’t have to keep a mountain of notes in order to know your financial situation, nor do you have to continuously print out your bank statement. With the help of bookkeeping software, you can start keeping records of the money going out of the business, as well as the money coming into the business. This software allows you to automate much of the process, as well, such as automatically recording income that comes in through your merchant account, or setting up records of your routine payments to service and utility providers. Make sure that you back up your financial records, as well, whether it’s through the cloud, by storing them as physical files, or both. You don’t want your financial records to go up in smoke if your hard drive gets corrupted, for instance.
Don’t be afraid to delegate
The more complex and large your business is, the harder it’s going to be to stay on top of everything, yourself. The admin work required to manage your finances is likely to grow right alongside it. As such, you should consider having some professional help in maintaining those records for you. You can hire someone to manage it internally, but if your record-keeping needs don’t quite meet the workload required for a full-time employee, and you can’t give them other responsibilities alongside it, then you may want to look for bookkeeper services, instead. Bookkeepers are specifically there to help you maintain and keep up-to-date with your financial records, allowing you the peace of mind to let them do it for you.
Know your costs
One of the most important parts of ensuring that you have a more complete overview of your finances is not losing track of your costs, as it is so often easy to do. Make sure that you’re not only accounting for costs as and when they happen, but that you’re paying attention to the outgoings of your business bank account, making a note of any bills, fees, or other costs as they come along, and taking the time to assign a cause for all of them. Otherwise, you could be paying for things with no knowledge of it. Expense tracking software can help your employees keep receipts and track costs that they might accrue on the company dime, as well.
Keep an eye on cashflow and reserves
Of course, it is important to know what your financial situation is at the moment, as well. Make it easy for you to see what cash is available to your business at a glance so that you have a good idea of whether or not you might be able to handle certain costs. That said, you should also make sure that your financial records give you a good balance of your cash flow so that you can see when all is said and done, whether you’re making a profit or not. This can be the indicator that you need to discover whether you should be cutting back costs or trying to get more revenue from your customers.
Track what’s owed
Getting more revenue from your customers does not always require you to raise your prices. Offering additional services at extra cost is one way, too. However, for many businesses, it’s most important to make sure that you’re getting what you’re owed. If your business operates by invoice, then you should ensure that you’re not losing track of any payments that might be due to you. Automated invoice processing can make sure that you’re streamlining the process of billing customers, sending reminders, and getting alerts as to what is due and when. But it can also offer some transparency on the money that is coming your way, which can offer more crucial information to your cash flow and profit projections. You should account for money that you can reliably expect to receive in the future.
Know what you owe, as well
Naturally, the shoe fits just as well on the other foot, as well. Just as you should be mindful of what is owed to you, you should never lose track of what you owe. If you have taken out any debts, then make sure that you account for any regular payments, and try to make the information of how much you owe, and what interest you’re paying as readily available as possible. It may be that you’re able to reduce payments in the future by finding a loan consolidation service. You should be sure to track all credit cards, minimum payments, and when you’re able to pay above it to reduce your overall debt burden as best as possible.
Mind your tax situation
Your business has to pay tax. It may have to pay tax on a lot of things, from its sales to assets you own, including buildings, not to mention any profit made. Taxes are one of the key reasons you want to make sure that your records are as clean and complete as possible. But you also want to ensure that you’re preparing for your tax burden, as failing to pay it off in a timely manner is likely to result in additional fines. Do your research to work out how much you’re going to owe in tax with as much advance as possible so that you can start setting aside the money necessary to pay it.
Gain expert advice on money moves
Whether you’re looking to try and reduce your tax burden as best as possible, to have a better idea of where to put your profits so that you gain as much from them as possible, or just to look for new investment opportunities or markets for your business, working with an accountant is always recommended for growing businesses. Accountants are not just bookkeepers, although they can often provide the same service. They are also legally qualified to offer financial advice and, more specifically, tax advice. For a lot of business owners, an accountant becomes a vital advisor on all matters of money management, business and personal.
A more comprehensive picture of your business’s financial state allows you to make more sensible and informed decisions. Keep that in mind as you follow the tips above to ensure that you can always see how your business is doing, financially.