Do you find keeping your business finances in order to be a pain?
Although it may appear to be, and often is tedious, keeping your finances in order is extremely important.
It helps you to project where your business is headed, and when you know exactly how your revenue and expenses are stacking up, you can begin to make more informed decisions for your business.
Maintaining your financial records also makes tax reporting and payments a lot more manageable. It can also prevent you from losing your sanity and getting dragged into a potential legal issue regarding your funds and financial processes.
Don’t try to do it all alone. Leverage the talent and the tools that are available to you. Here are six tips to help you keep your business finances in order:
Keep your personal and business finances separate.
Mixing your personal and business finances will inevitably result in confusion. It might seem convenient to charge everything to a single card, but ultimately this will make tracking your spending far more complicated than it needs to be. It can also be problematic to justify some of the expenses to HMRC if you ever get audited.
Begin by opening separate bank and credit card accounts for your business. For the ongoing tracking and measuring of your finances, and for tax purposes, this practice will take a major headache out of sorting your transactions every quarter, or every year as the case may be.
This will also take the guesswork out of the equation. If you want to be successful in business, you need to be able to monitor and track your key performance indicators. You need to know the score, and some of the most important elements include cash flow, expenses, revenue, profit and so on.
Remember, separating accounts is one thing, a separate account will not give you any advantage if you do not have an appropriate attitude and self-control.
Choose accounting software that makes sense for your business.
When it comes to accounting software, there are a variety of different solutions. Think of Xero, QuickBooks and Freshbooks or Sage. Most small startups will still be using Excel. The best accounting software depends on your business, and it’s worth considering several options before making a decision.
You don’t have to move your financial data from desktop software to the cloud. Desktop software such as Sage or Excel is good as long as they meet your business needs.
Depending on your business type and set up cloud-based tools might be a better solution. Cloud software allows you to view real-time insights, and it can be accessed from anywhere at any time. The ability to keep an eye on your finances on the fly gives you a great deal of flexibility as a business owner.
If your business is registered for VAT than moving to a cloud-based solution is definitely a smart move, considering that MTD for VAT registered business kicks in from the 1st April 2019. If you need more information on MTD than you need to contact us now!
If you’ve already picked out an online solution, ensure that it’s the right one for you and your business. Today more than ever, there are a myriad of options to choose from, and if you aren’t satisfied with your current service, you can always make the switch to another platform that better matches your needs.
Remember, there is no software in this world which will replace human element completely. What you put into the software is what you get, and I do not mean money spent on it.
Consider hiring a professional bookkeeper.
Most people aren’t numbers people, and will never be excited about them as much as accountants or bookkeepers are. If managing your own finances is starting to get on your nerves, it’s time to look into hiring a qualified bookkeeper.
Many entrepreneurs have a tendency to try to handle everything themselves. But as with legal matters, the granular elements of small-business accounting aren’t usually within a business owner’s wheelhouse.
Although it’s easy to
Stay organized and plan ahead.
The tips mentioned in this blog should help with keeping your finances organized. Moreover, monitoring your finances and projecting future revenue and expenses will enable you to make better long-term decisions for your business.
Without this information, planning ahead can prove challenging. If you aren’t looking at the future of your business, you could be taken by surprise. If you want to get ahead and stay ahead of the competition, you should plan a minimum of 5 years in advance.
You’ll be able to mitigate unwanted surprises if you stay ahead of the ball. Even if unexpected expenses arise, if you’ve been practising conservatism in your spending, you shouldn’t run into any major problems.
Make a budget.
Part of staying organized and planning ahead should include creating a budget. Many business owners view this step as dull and unnecessary, but the importance of a budget could be equated with the value of a well-formed business plan.
A budget is not a tool for planning out how every penny should be spent. Rather, it’s a framework that you can use to help you make clear-headed decisions, whether it’s increasing your marketing spend, or cutting expansion costs to keep your profits on track.
Make a budget and use it as your guide. Don’t allow it to force you into decisions you don’t want to make, but use it to make adjustments when and where necessary.
If you are using software either cloud-based or desktop, it is easy to create a budget in any of those and with the likes of Sage, Xero and Quickbooks you are able to get almost real-time analysis of it. You will be able to see if you are over or under the budget and most importantly you will be able to compare it to previous periods and analyse it in connection to your sales and other expenditure and investment.
The reality is that many business owners do not keep track of their finances. Whether you know it or not, this could mean missing out on opportunities to minimize your expenses and maximize your profits.
Preparing business accounts can take time, but the end result is worth the effort. Even if you don’t consider finances to be the most important part of your business, streamlining your process will allow you to develop a straightforward step-by-step process as opposed to a search-and-find initiative.
Make the effort to simplify the organization of your business finances moving forward. This will allow for long-term stability and sustainability.