You have probably heard the statistic that 60% of small businesses fail within the first five years. Nobody wants to be part of that 60% that are unsuccessful, but some small business owners are ill-equipped to manage the financial aspect of running a business. Everyone wants to make money, but some people may not have a clear picture of their company’s current economic status. Here are five steps to actively and effectively manage your small businesses finances.
Know When to Call in the Professionals
One of the challenges to running a small business is the number of areas demanding your time and attention. Sometimes managing your own finances, as well as running the day to day company, managing staff, marketing yourself, and maintaining any semblance of a life outside of work can become overwhelming. If this is the case, it is worth considering the services of one of the local small business accountants. They can help you to determine how your business is tracking financially and help you plan for a prosperous future.
Finding a good accountant can assist you to with accounts and bookkeeping, financial advice, business planning and tax management.
Whether you decide to hire an accountant or manage your finances yourself, it is essential to have a thorough understanding of your costs, your incomings, and what your break-even point is. Many small business owners establish their company with passion and excitement, but without a solid financial plan. They can end up in a situation where they are not making sufficient money to pay themselves for their own time, with no strategy in place to move forward to where they need to be. At whatever point you are in your business journey, it is worth educating yourself by speaking with others who have been in similar situations to you, conducting research online and conducting a financial analysis into your business.
Keep on Top of the Bookkeeping
Avoid a situation where you keep shoving your receipts in a shoebox and planning to look at it tomorrow. Setting up a robust bookkeeping system early on, and updating it every week without fail, is a business practice that will stand you in good stead for the future. It will help you to monitor your business performance and be invaluable at tax time.
Setting a Strict Business Budget
Some entrepreneurs get themselves in trouble by using the old adage “you have to spend money to make money” as an excuse to splash cash around. Keeping to a strict budget will allow you to plan for upcoming expenses, have some money on hand if something unexpected crops up, and be strategic about the best areas to invest in growing your business.
You may be able to cut costs by shopping around when it comes to suppliers, bartering services within the community, and taking a chance on passionate, knowledgeable but less experienced employees.
Separating Business and Personal Finances
To help you track your business expenses, make sure that you keep them completely separate from your personal expenses. Set up a separate business banking account, and make sure that you have a credit or debit card associated with that account so that you can easily track all your costs.
Finance may not be your favorite topic, but it is an essential component to running a successful small business, so now is the time to build your fiscal finesse. Getting on top of the commercial side of the operation straight away will save you time and headaches further down the track.
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