If you’re about to launch or you’re in that exciting first year of business, make sure you get a solid grasp on the ‘money side’ early on. While your focus might be on building a customer base and driving sales, developing good cash flow habits stabilises your business and should be equally prioritised – if not more.
Poor money management can tear apart even the most profitable businesses. But the good news is, you don’t have to be an accounting whizz to set your business up for success.
There are a few simple rules that can help you manage your money easier and use your resources effectively, without getting overwhelmed.
And if you’ve already started your business, it’s never too late to embed these practices into your operations.
Separating personal and business transactions is one of the most useful things you can do. This makes it easier to track your cash flow, manage tax deductions and apply for finance if you need it.
You can also budget business expenses better, simplify accounting, create consistency and gain peace of mind your bookkeeping is clean. The sooner you separate accounts, the easier it is to reduce your legal liability.
Keeping meticulous books, no matter what is key to crushing cash flow problems. If you’re spending more than you’re receiving you may find yourself in a challenging position or start digging into your personal expenses.
Set up good financial habits by tracking expenses and planning for potential issues. Be sure to include and keep receipts for fuel, supplier costs, client meetings, business subscriptions and website and marketing expenses. You can log them in a business spreadsheet or automate the process with bookkeeping software such as QuickBooks or Xero.
Handling money well is your most important business tool. Skills and passion can only get business owners so far, but if you don’t recognise cash flow warning signs, finances can get messy very quickly.
Common money mistakes include no backup funding, cost-cutting to increase profits and failing to handle unpredicted finances. Mixing accounts, unrealistic budgets and paying off debt with personal funds are also common culprits.
Another common money mistake is not paying yourself first.
Especially when you’re just starting out, it’s normal to prioritise other expenses such as suppliers and marketing costs. But if you don’t get into the habit of paying yourself early, you could end up paying more income tax and put unplanned strain on your cash flow. As your profits grow make sure you build your salary.
Bookkeeping and tax headaches are very real for business owners. Preserve your sanity by investing in automation, which benefits your business through professionalism, time-saving organisation and reduced operation costs.
Invoice automation also strengthens your brand identity and customer relationship management. You’ll get paid faster by clients, ensure a transparent and accurate process, and minimise stress come tax time. If you need extra support consider engaging a bookkeeper to finalise monthly statements.
Starting a new business is rewarding, but its success relies upon how well you manage your money. It also depends the strength of your idea, your business plan and your marketing plan.
Call the practice to make an appointment with a financial planner on tel: |PHONE| or Download Flying Solo’s free Starting Out Kit if you would like to discuss different options available to manage your money when starting a business.
Source: Flying Solo October 2021
This article by Jayde Walker is reproduced with the permission of Flying Solo – Australia’s micro business community. Find out more and join over 100K others https://www.flyingsolo.com.au/join.
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