Managing Your Small Business Finances
Managing the money wisely must be the topmost priority of every small business owner. The manner in which the money moves in and out of the business is the cash flow. Your motive must be to keep cash in the operating account of your business for as long as possible. Management of finances of your small business finances needs certain skills. You can follow the following tips to handle the finances of your small business
HIRING AN ACCOUNTANT
Being a business advisor, an accountant aids to manage small business finances. You can also hire an Accountant Melbourne to seek basic accounting services. The accountant can also help in planning and preparing taxes. If he holds a degree in accounting and payroll services or is a certified public accountant.
GET CLOUD-BASED ACCOUNTING SOFTWARE
The accounting software based on web accounting can access, track, and update data from anywhere at any time. You can see your accounting records and can create invoices being anywhere whether at the office or while traveling. Moreover, you can import your credit card and banking statements
MANAGE YOUR ACCOUNTING RECORDS EFFICIENTLY
This is a top prioritized tip that you must manage your records efficiently. You must keep the records in such a way that at the time of tax, you must not wait your time to put the records in sequence. This scenario can ruin your time and in hassle tax deadline can surpass.
MAKE USE OF FINANCIAL STATEMENTS IN STRATEGY
You must be aware of the manner to read the financial statements. If you do not have an idea about it, then your accountant can teach you so. The financial statements are categorized into three ways: the income statement, the cash flow statement, and the balance sheet. The cash flow statement makes a record of operating activities, financial inflow or outflow, or any kind of investments. The balance sheet gives data linked to the assets and liabilities of the company. The income statement shows the revenue that is earned within a specified time.
ANALYZE THE FINANCIAL POSITION ON MONTHLY BASIS
Till the mid of the month, you must notice that how your business performed last month. You will get to know about this by analyzing the monthly financial statements that include cash flow statements, income statements, and balance sheets, which are prepared by accountants.
SET CAPITAL RULES
The method, in which you pay your bills, must be set by you and should be paid when you receive an invoice. Like me, I pay my vendor twice a month and they do not get to demand payment. I know when to pay them, this helps to manage my cash flow in a better manner.
MAKE USE OF BUDGET
You must prepare the budget of business for the upcoming years. Without reviewing the budget, do not make any decisions on spending. This will aid you to ignore the syndrome of “bright shiny object”. If it is not in the budget, then you must not make a move.
REVIEW COSTS
Keep the monthly and quarterly expenses of your small business on track. Mechanisms such as inventory, labor, sales commissions, and cost of marketing can add instantly. However, analyzing them on regular basis allows you to track where your capital is going and allows you to cut back if required.
MAKE SALES PROJECTION
Having vivid sales estimation is crucial. You must have a clear idea that how much revenue will be coming in on monthly basis. Furthermore, you can have the sales goals for the week for your team and for yourself.
BE AT THE TOP OF INVOICING
Send the invoices when the services are provided. If you have a business based on service, try to get a deposit. Send the invoices which allow Paypal, credit card, or ACH payments. Set terms of payment in your contract and assure that it is on every invoice.
FOLLOW UP INVOICES
If you make use of electronic invoices, you may set a reminder to move out two days before due of invoice. On your CRM as well, you can create reminder email templates. It is advisable to email and phone. To get some help instantly, get a name in accounts payable as the initiation of engagement.
SEPARATE THE BUSINESS AND PERSONAL FINANCES
It is advisable always to separate business and personal finances. Grab the credit card of business and put the expenses like subscriptions and travel on it. You can otherwise use your debit card or Paypal account to pay your vendors and other materials.
GO FOR PROFIT ACCOUNT
For yourself, you must open a profit account. We must transfer a certain percentage from every payment that the business receives. Set up it in a bank that is difficult to access. In this manner, you will at least have something for yourself and the business needs to operate on leftovers sometimes.
MAINTAIN EMERGENCY FUND FOR BUSINESS
Like in the same manner as you have an account for your household, you need to have an account for your business as well. Sometimes unexpected things happen like customers pay late. You must assure that your business must have a backup plan. You can also make use of this money to pay off your taxes.
APPLY FOR CREDIT BEFORE YOU NEED
It is obvious that the banks do not move quickly; do not wait till to get the cash by applying for a loan or line of credit. Whenever you get a big contract, move to the bank, and apply for a line of credit. Bear in mind that you can borrow only 10-15% of Gross Avenue.
USE LINE OF CREDIT WISELY
Many businesses face the trouble by not making use of the line of credit wisely. Once the cash shortage is resolved, cash flow issues must be resolved down. As the banks can pull the line of credit at any time, do not treat it like a credit card.
CUT THE COSTS ON QUARTERLY BASIS
It is crucial to keep the expenses in check, without sacrificing the customer experience. Look for the methods to cut variable and fixed costs. Look for a co-working space rather than a professional office. Cut the marketing expenses which do not deliver. Try to barter the services with other professionals and cut down the costs.
MONITOR THE PROFIT MARGIN
It is significant that you look at the financial performance of the company in comparison to the past years to analyze the profit margin. It must enhance each year. It is about profit not about gross revenue.
ESTIMATE MARKETING PERFORMANCE
You must not spend money on marketing efforts that you cannot tie back to sales. There is a direct cause and effect if you are investing in PPC or Pay Per Clicks. It is also required to calculate things such as cost per lead (CPL) and cost per sale (CPS) to understand the financial side of sales efforts.
PLAN THE TAXES
You may talk to the planning professional regarding taxes. Whether it could be the tax planning for the current year or next financial year, a planning expert can act like wonders. With the modifications in the tax codes which happen every year, avoid paying more taxes than you need.
Just because of poor cash flow management, do not let your business suffer. While hiring a Bookkeeper Melbourne, look for a person who works with small businesses. It would be an added advantage if they have experience in your industry. Analyze the above-mentioned tips regarding the finances of your small business and your business will not suffer finance shortages.