Running a business involves many aspects from production to people skills, from invoicing to client management, there are many different areas involved and the chances are when you first start out that you will be doing most of it yourself.
However, one area that is always more complicated and is worth seeking professional help with, is your business finances. There are so many things to think about, from taxes to profit and loss, wages to VAT, that it can quickly become a real headache. This is where services like Early Growth come in handy to help manage finances and keep accounting up to date. Whatever works for the business must be done correctly to reap all the benefits.
Using accounting software can help keep you on track and having an accountant on the books will help to make sure you are getting the best possible results from your business taxes and other areas where you are not necessarily an expert. You can also try using an online accounting software like Crunch so you have access to your records any time or day.
But if you do want to manage your business money yourself, or at least the day-to-day recording and accounting, then take a look at our top five tips for making it that little bit easier on yourself as you move through your business.
- Don’t forget about your tax bill
As an employee you won’t have had to think about taxes at all as your employer would have taken care of all of that, however, as a business owner while it might be nice to have theoretically tax-free income each month you need to remember you will have a tax bill to pay at the end of the year and potentially during the year as well.
So make sure you don’t forget about that and put money aside regularly to make sure you don’t come to the end of the year to be hit with a very large tax bill which you can’t possibly pay back. Set up an account to pay your tax money into regularly each month and by the end of the year you should be all set.
As well as the money, you need to make sure you are fully aware of all your tax obligations and potential deductions – this is where an accountant can be really helpful. They will know all of the areas you can claim for, for your business and can save you money. You could even benefit from a tax attorney too. They could help businesses with a number of legal tax issues, such as being audited or dealing with the IRS.
- Make sure you budget for all costs
Lack of cash flow is a common issue leading to new business failures – you need to create a realistic budget so that you know how much comes in and out of your business at all times so you can predict and monitor cash flow.
It’s important to forecast what you anticipate coming in and to manage the costs going out, on a regular basis, so you have a picture at all times and don’t suddenly become stuck with no money should something happen, like a late payment from a customer.
You should be able to predict what your business costs will be, and keep them all recorded in a spreadsheet, whether that be for marketing, staff costs, building costs, vehicle costs and any other related business costs.
Once you know how much you need to pay out each week or each month, you can work out how much you need to earn to make a profit, which makes running the business much easier to calculate and manage.
- Record all income and costs
Make sure you know all of your income and all of your costs associated with your business – you need to know how much money is coming in from client payments or contracted work, and how much you are paying out for suppliers, bills and other costs.
It’s important to keep track of everything so that you can carry out regular reviews and remove any unnecessary costs and check when payments are overdue and might need chasing, so that your business is operating at its best every month.
- Keep on top of your expenses
You need to keep on top of all business expenses so make sure you keep and log all of your receipts whether for business travel, meals out or printing costs. You will need this for your tax paperwork but it will also give you a great picture of your spending patterns.
You can then look at where you might be able to reduce potential costs, for example, talking to clients on skype and screen sharing documents, rather than driving miles to meet them in person every time.
You might be able to swap out a large amount of expensive printed marketing materials for an online advertising campaign to secure new sales leads, for example, or just look around for a cheaper supplier. Unless your keep on top of your expenses you won’t know where you are spending the money.
- Have an emergency fund available
You can’t predict everything that could happen so it’s important to have a business emergency fund in place, in case something were to happen like your computer dies, or your key supplier goes bankrupt without fulfilling your orders.
It’s important to have money in place so that you can fulfil your own business continuity plan. Managing this emergency pot of cash will give you peace of mind, and if you don’t need it you can use it to invest in the business at a later date.
Having an emergency fund makes good sense, particularly if your cash flow is not overly reliable with late paying clients. It is a buffer there to help keep your business afloat if you were to hit unpredicted hard times.
Managing your own business finance needn’t become a nightmare as long as you keep records of all income and outgoings and make sure you know your business numbers. It’s important to keep track of money coming in, expenses and costs to pay out and to make sure that you are making a profit on top.
While accountants can provide great advice and a great service, you can easily manage your own accounts when you first start out at a small level and some of the accounting software systems out there can help to make life much easier.