When you are running a small business, you will be wearing many different hats, and struggling with a long to-do list. Your activities will be directed towards getting the business to make money. After all, a business that is not making money is not better than a hobby.
Regardless of your financial goals, your business may not be able to make money if you cannot manage and organise its finances. Here are six simple steps for creating order in the finances of your business:
1. Keep Track Of Your Income: You need to track the income of your business at daily, weekly, monthly and yearly intervals. This will help you understand how much money the business is bringing in.
You can achieve this by using a basic spreadsheet. Better still, you can automate your bookkeeping, which will categorise different income streams of your business, and make them available real-time. This will enable you to monitor whether you are meeting, or missing, the income goal of your business.
2. Track and Audit Your Expenses: There are various expenses that your business must settle in the course of its trading activities. You must track these expenses in the same way that you track the income of the business
This will help you avoid over-spending or making unnecessary expenditures. It will also keep your business in a condition to regularly audit its expenses, and ready when it is time to file its tax returns.
3. Separate Your Bank Accounts: Small Business Owners, especially during start-ups, make the mistake of using the same bank account for their businesses and themselves. This can cause confusion, especially at tax time when you and the tax man have to bicker over what is a business or personal expense, or what is tax-deductible.
You can avoid this by opening a separate bank account for your business, allowing the income of your business to flow through this account, and using it to settle the expenses of the business. This makes it easy to keep track of your cash flow as you review your bank statement at the end of each month.
4. Make It Easy For Customers To Pay You: The essence of your business is to make a product or provide a service that your customers pay for. The flip side is that no sale is complete until your customer pays for your product or service, and the money is deposited in your cash box or bank account.
If your business sells products, your customer could pay cash or use an Automated Teller Machine (ATM) card at the point of sale. If it is providing a service, you may send an invoice to your customer who would send a cheque to you or make an electronic transfer to your bank account. You may also set up a digital cart which enables your customer to buy from an online cart on your website.
Depending on how your business works, you should provide a combination of options for your business to receive payments from its customers, preferably in easy and near effortless processes.
5. Digitise Your Paperwork: Another way to keep your business organised is to digitise most of its paperwork. You should save your documents digitally and back them up with a secure cloud-based service.
You must avoid storing your vital documents in your computer or simply leaving them as hard copies in file cabinets. Some of the key documents you should digitise are:
- Bookkeeping and accounting records.
- Bank records and statements.
- Leases, purchase contracts and similar agreements.
- Trademarks, Patents, Permits and Licences.
- Contracts of employment and related records.
6. Hold Regular Finance Review Meetings: The income and expenses of your business will fluctuate. They can be on or off target at different times. To ensure that you are on top of things, that you understand what is happening to the finances of your business, you must check them as often as possible.
It is therefore important for you to schedule a weekly meeting to review the finances of your business. This will keep your business organised, help you stay abreast of what is really going on in the business, avoid liabilities that can cripple the business and keep it productive and profitable.
These simple steps will help you organise the finances of your small business, and keep it profitable.