Are you a business owner? Do you find any difficulty in managing your business finances? Is it tedious to keep all the finances in order? Whether it is a fledgeling company or just want to run the rat race, the biggest challenge you face is stabilizing your finances. Often most of the entrepreneurs are concerned about acquiring the right skills. It helps in providing qualitative product or service. However, if you don’t have the experience in managing business finances you end up in bad financial habits. But this chore one day will affect your business.
Hence, the most important step to foresee the successful business is educating yourself. Understand the concepts like accounting, applying for a loan, and maintaining financial statements. Consequently, don’t try all these alone. It is better to hire a professional who has prowess in these skills.
Here are a few tips to look into that helps in administering your business finances strategically.
Keep a separate account for businesses and personal
Combining your personal and business expenditure will eventually lead to confusion. At first, it might seem to be an easy alternative. But as the days pass by it will be tedious to track your expenditures. So, it is always pivotal to build a firewall between your business and personal spendings. Moreover, it is beneficial at the time of tax calculations. And important to safeguard your personal assets.
Initiate the process by opening individual bank accounts. This is important for all the legal implications. This process will ease you out of separating your transactions for every quarter or year. Furthermore, this simplifies the approach of guesswork and computational work.
For any business legal protections having a separate business, entity portrays you as a business owner. By having a dedicated business account you can pay your bills, collect invoice payments, deposit cash, buy machinery. But all this can be monitored according to your cash-flows and without spending a penny from your personal account.
Additionally, it is paramount to consider yourself as an individual employee and pay yourself.
This is equally important and many business owners neglect and save those for further business expenses. Remember that you are also a part of a business and you need to pay yourself as much as you remunerate others.
Have Accounting software
If you want to streamline your finances, it is always better to have accounting software at hand. In the first place, there is numerous accounting software which can be accessed for different solutions. Without a doubt, they are
- User-friendly software
- Facilitates multi-currency transactions
- Web-based applications
- Integrated with other software
- Secure your confidential data
A solid account software is essential for the company. Although this may be true, having the right tool for the present and not in the future simplifies your work. In fact, you are only at the beginning stages, but as the days pass on your businesses brings more complex scenarios. More customers, a huge staff, and a large operational budget. There will also be a painstaking task of balancing your financial records.
As enhancements in your company take place, one of these should be on accounting tools. Start with the initial price and move on to the advanced features. Additionally, they are few accounting tools you need to take care, these are:
- Freshbooks
- Sage50 cloud
- Tipalti
- Zoho books
- FreeAgent etc.
These can be utilized according to your business needs. It is always worth considering the features before planning to purchase one. If you have already chosen the best for your business, make sure that it is the right fit. In the event that is not the correct choice, then they are a myriad of choices available. Under those circumstances, you can shift to another platform which better matches your requirements.
Hire a professional bookkeeper
A professional hirer, save your money by making fewer mistakes. Moreover, bills get faster than ever. Most entrepreneurs aren’t numbers people, they are not excited as much as the bookkeeper or accountant. If administering the finances is getting on your nerves, then it is time to search for a professional bookkeeper. Even though you may not need one at present you can consider them for helping you in the business financial activities. Many business owners have a tendency to handle their finances by themselves. But here are a few reasons why you need to hire one.
To keep your focus on other important activities like marketing, HR, planning, funding and any other key activities.
Not many owners have profound knowledge of accounting concepts. Hence, it is advisable to stay out of what you don’t really know. And hire the one who is a certified professional.
Calibrate and adjust your work-life balance. Segregate the work among different employees and have time for your loved ones also.
With all the things managing solely, you may tend to forget or postpone certain things. But by hiring the professional accountant, ensure that everything is paid timely.
It’s exemplary for the business owners to hire the accountant who keeps track of your tax filings. Based on business structure, they are different tax compliances like estimated or approximated tax exemptions, Corporate tax.
As you are so busy, having an eye on these becomes difficult. Hence hire the one who takes care of all your tax payments.
Albeit, you take all the measures by yourself, hiring an in-house employee can save your time and effort in the long haul. You will be free to concentrate more on other important activities.
Plan Ahead
No matter how much amount you have at your hands if you plan your business expenses ahead then managing your finances will be easy. Being systematized with your business finances is more than merely paying bills and taxes. Moreover, projecting your expenses and revenues based on the present numbers will make you take better decisions.
Again, it becomes a challenging task in the future without proper estimation. If you say that your business future doesn’t matter is the most surprising information. If you want to go ahead of this fast-paced world, then you need to plan 10 years down the line.
Planning ahead gives an edge over unwanted surprises. Moreover, this allows you to stay forefront of the ball. Even though there are any unexpected expenses, as you are practising conservatism, this doesn’t lead to any major hurdles. But if you start automating things like limiting your credit card purchases, contributing to your savings, will help in bad spending.
Keep an eye on growth opportunities
In addition, to all the above, you need to look for future prospects and save money. Small business is sometimes beneficial to the owners when well-nurtured can gives long-run financial independence.
Moreover, this thrives you to move forward in the good financial direction. To get the lucrative opportunities it is always to look into the future. A small business who are striving to look into the future endeavours, need to look into the investment goals.
Basically, these depend on few considerations like looking into the profit margins. When the SMBs become successful, there is an amount leftover, after all the allocations are over. Correspondingly the owners can plan to reinvest the profits for future growth. Furthermore, they can declare a dividend or invest in stocks, real estate and bonds. This will have an enormous effect on net worth.
If you are willing to invest in your future endeavours, clients and customer show a keen interest in your service or product. Additionally, employees demonstrate more productivity. As they think that you are interested in their career growth. Ultimately, you gain more value for your brand and business. You can also take loans like business loans, equipment lease, any mortgage loans and have confidence that you can clear the dues.
Maintain Billing Strategy
Every business has only a handful of clients who are a pain in their neck while the terms of payment come. Moreover, these clients end up giving late payments for the invoices billed. Managing businesses finances also means administering the cash flows and have sustaining business operations daily. If you are suffering to get payments from these clients then it is time to go creative of billing them. However, too much tied up amount can lead to business failures.
If there is a troublesome client you can fix offers like 2/10 net 30. This signifies that, if the client pays within 10 days, then there will be a 2% discount.
Additionally, there should be a billing software for every business. This software manages your financial transactions and invoices alone. However, these invoices are handles online and on the cloud. This helps in saving your important documents or data. Consequently, there is no need to pile up all the paper files in a room. This software saves your time, and effort and most importantly any extra charges spent on stationery like pen, ink, paper and staff to that specific task.
Finally, after setting up the invoicing software, you are required to set a few terms & conditions. For instance, set the payment terms and notify your clients well in advance. In this way whenever there are conflicts, you can eradicate them.
Develop better financial benefits
Setting up the financial strategies and keeping up the pace with them is essential. In particular start with the habit of setting up the time frame. Followed by reviewing the books. This will help you keep updated with your cashflows often. Having a good financial habit can take you through a long journey. This helps in
- Tracking your expenses and incomes
- Reduction in tax liability
- Being careful for not spending any extra amount
- Paying careful consideration to mortgage interest rates
- Saving half of your income for further expansion
This helps in monitoring the healthiness of your business. To emphasize, this can help to mitigate all the risks and business frauds. Having an accountant software help you take control of the work. If it is mobile friendly, it can even fit into your pockets and carries away your business activities.
Taking control of your finances and having well-structured financial planning leads to good financial habits. It helps to attain your goals faster. So, These good habits help you to spend more wisely. This paves the way for increases financial stability.
Focus on expenditures along with ROI
It is crucial to monitor all your expenditure and returns that you a clear picture of what your investments are. In other words, where are the investments going? Markedly, are they giving any positive returns? To answer this, you need to look into the expenditure strategies of your business. There’re various tools which let you know about the unwanted expenditures.
ROI is a popular measuring tool that helps in assessing the financial consequences of business investments. This is equally important for financial and non-financial entrepreneurs. As it tells you the profits you earned at the end of the period. It lets you know where to cut the costs, and streamline your cashflows.
With attention to ROI, this lets you know the spending area. This lets you know how efficient your efforts are. This gives clear visibility of the financial numbers. Certainly a ratio between the direct costs and the output. It is very important to realize these aspects, as it helps in making informed decisions.
Educate Yourself
Significantly, this is not the last thing. But educating yourself on various aspects of finances helps in managing your finances successfully. For budding entrepreneurs, it is important to understand your financial statements. This is the most crucial statements which tell you all about your capital.
Where it is coming from
How many transactions it has undergone
Where it is heading to
This helps in making the best investments and aids in future improvements. To enumerate, when you are in business building wealth is very obvious. Hence, consider gaining knowledge on financial topics.
Financial statements are sub-categorized into four
- Cash-flow statement
- Income and Expenditure Statement
- Balance Sheet
- Statement of shareholder’s equity
To emphasize, the Cashflow statement is more related to the operating activities- cash inflows and outflows.
The balance sheet is more about the liabilities and assets your business has. Along with the shareholder’s equity.
The revenue earned and expenditures made is reflected in the income statement. This can be for a specific period.
The company’s preference and equity shares are computed in the statement of shareholder’s equity.
Conclusion
By all means, running your own business can be exciting. Irrespective of the business line, the point often overlooked by small business owners is about managing the finances. But this will be a challenging task when the business grows. Hence it is always important to know the tips well in advance.
So, if you facing any hiccups in the future, it makes you stand outside the crowd. Know the tips along with others and have a great venture in future. The more you learn about the financial statements and tactics, the better smart decisions you take.
