Organise your finances with these seven steps
Going into business for yourself is a big deal. There’s always a long to-do list and you’ll find yourself wearing many different hats from time to time. Your business is more of a hobby if you’re not making money. Properly managing and organising your small-business finances can contribute to the success of your business and make sure you’re hitting your profit goals. Like personal finance, there are plenty of ways to organise your small-business finances depending on what your goals are.
Here are seven key steps to take..
1. Track your income
It’s important to know how much you make. You can track your income, monthly, weekly or even daily so you can better understand how much money you’re bringing in.
If you use invoicing or bookkeeping software, you can also use a program to help you track your business income. Another benefit of tracking your income is that it allows you to monitor things better so you can determine if and how the numbers fluctuate. If you have a specific income goal, you’ll definitely want to start tracking your income regularly as well.
2. Track and audit your expenses
If you’re going to track your income, you need to track your expenses as well. Entrepreneurs have important expenses that must be paid in order to keep the business running.
You can deduct some of your business expenses on your taxes and this will lower your taxable income. It will also lower the amount of money that hits your pocket. As a result, most business owners actually net a lower income than what they gross.
You can track your expenses the same way you track your expenses. Doing this will allow you to audit your expenses regularly as well so can make sure you’re not overspending on unnecessary costs.
3. Keep a separate bank account
As soon as your business starts making money, you need to separate your finances. If you keep all my personal and business finances in one bank account during you first year of entrepreneurship, you’ll truly regret it. your year end will be confused and everything will become so unorganised. It can take countless hours to get reorganised.
You can avoid this headache by simply opening a separate bank account for your business. You should open up a business bank account, or at very least, open a separate personal account and treat it like a business account.
Allow your income to filter through that account and you can pay all your expenses from that account. Each month you’ll receive a statement and it will be easier to keep track of your cash flow.
4. Protect your business
Each business requires its own level of protection, but you may want to consider getting some insurance or even establishing a Limited Company. Establishing a Limited Company allows you to separate your business identity and finances from your personal finances.
For example, if you ever had to undergo any legal issues, your personal property and assets would not be liable. Be sure to renew any important certifications or licenses you need to remain compliant by adding it to your calendar. Protecting your business is the best way to ensure any financial issues that may affect your business doesn’t pour into your personal assets.
5. Consider how you’ll receive payments
You want to make receiving payments a smooth and easy process. To do that, you need to determine how you’ll accept payments. Making this choice depends on how your business works. If you’re providing a service, you may want to send invoices out regularly. If you’re selling products, you may want to accept credit card payments at your location or set up an online cart option for your website.
Compare options and consider how much the fees will be in order to find the right solution for you.
6. Sort hard copies and digitise them
Everyone hates dealing with tons of paper. That’s why you shoul try to digitise most of the financial paperwork for your business to stay organised. You can save documents digitally and protect them by using a third-party secure service. You don’t have to store everything on your computer and probably shouldn’t for security reasons.
If you prefer to keep some hard copies, be sure to sort through them and organise them in a filing system. You’ll want to keep track of important paperwork like:
• Accounting and bookkeeping records
• Bank records
• Contracts, including leases and purchase agreements
• Trademark applications and patents
• Permits and licenses
• Employee records
Getting these documents organised and digitised (if necessary) will pay off big time when taxes are due.
7. Schedule regular money meetings
It’s important to schedule time to sit down and go over your business finances regularly. Your income and expenses will fluctuate, so it’s best to stay on top of things by checking in often. Add a weekly finance meeting to your calendar so you can stay organised and avoid falling behind on things.
When you fall off the wagon with your business finances, it makes it difficult to stay productive and understand what’s truly going on with your situation. This can allow burdens like debt to creep in and deter you from financial success with your business.
These basic seven starter steps will help you get on track and better organise your small-business finances. You can also do other things like create a business budget, start contributing to a pension for retirement, get accounting software or even hire an accountant or tax professional to touch base with each quarter.