Whether you are a seasoned entrepreneur or just starting your own business, one of the best things you can do for your business is get your finances organized.
With the right techniques, developing a great business finance strategy can help you reduce the cost of doing business, make plans for the future, and prepare for tax season.
Here are seven great organizing tips you can start implementing today:
1. Start on the right financial foot
If you are in the early stages of starting your business, now is the perfect time to gear yourself up for long-term financial health.
First, your business plan can serve as a roadmap. A traditional business plan often covers everything from detailed financial figures to your forward-looking plan and financial goals.
You can also search for resources to help you start your business. Various local, national, and private organizations can help you find funding and resources to start your business.
Nevertheless, you should also be financially prepared to spend a significant amount of money, especially early on. While the amounts can vary wildly by industry, Shopify’s data shows that business owners with no employees spend about $18,000 in the first year alone.
2. Develop a business budget
Creating a business budget is similar to what you would do for your household. You want to be sure you’re spending within your means and borrowing to create wealth rather than deplete it. Without a budget, you can feel out of control, overspend, and get into debt.
How much capital do you have now and coming in soon? How high are the fixed and variable costs of your company? Have you set aside money for future expenses or emergencies? These are just some of the questions you need to answer in order to develop a realistic and flexible business budget.
Once you have your business budget, you can create a profit and loss (P&L) statement, or income statement. This is a snapshot of your company’s income and expenses over a specified period of time, e.g. B. a quarter or a fiscal year. You will also need this document if you decide to apply for a business loan.
3. Choose the right accounting software
The right tools can make managing your business budget a lot easier — and save you time when tax season rolls around.
There are many accounting software programs on the market, so you should get the one that suits your industry, your needs, and your financial constraints. Free or very cheap versions are often available, and if you need more bells and whistles later, you can always upgrade.
Almost all of these programs can help you with your cash flow, payroll, bills, paying suppliers on time, and preparing for tax time. There’s no need to search for receipts or wonder if you have the money to pay the bills, as this information is stored on your desktop and is always available to you.
4. Open a commercial bank account
One of the most important rules of any organization as an entrepreneur or small business owner is to keep business and personal expenses separate.
It’s a good idea to have a checking account for business purposes only. Not only does it help you keep track of cash flow, but your personal wealth can be protected from court cases and audits if your business runs into legal trouble.
“It can take some getting used to figuring out how to separate the expenses associated with your business from your personal finances,” says Bob Marshall, business growth strategy executive, small business development, at Wells Fargo & Company. “It can also take time to open business accounts and set up the systems to properly track your business finances. But this separation is important. It can help you determine how healthy your business is and it makes life in tax time that much easier.”
You can even get creative with your accounts to make organizing your finances even easier.
“I have different accounts at the same bank for operating expenses, salary, expenses, taxes,” says Sejal Lakhani-Bhatt, CEO of CloudWerxe and TechWerxe. “That’s how I know for sure I’ll have the money for her when I need it.”
5. Choose the right business credit cards
As with deposit accounts, don’t fall into the disorganization trap of mixing personal and business credit card transactions. Not only can this unnecessarily complicate your financial affairs, but consumer cards don’t offer the unique benefits that business credit cards offer to your spending and your business.
Which Business Credit Card Should You Choose? That depends on your credit rating and what you expect from the account.
Some business credit cards come with free spend management tools. The American Express® Business Gold Card includes an annual year-end summary, the ability to connect your account to QuickBooks, access to Vendor Pay by Bill.com, and more.
If you want to give specific employees access to the account, get one that doesn’t charge for additional employee cards, like Chase’s Ink Business Preferred® credit card. They also have instant access to their transactions, so you don’t have to wait for them to file an expense report.
A business credit card can also help you build your business credit score, which is distinct from your personal credit score. A good business loan is essential for accessing future financing, insurance and more.
6. Make regular checks a habit
Even with the best systems in place, it’s easy for your financial management to falter when you’re busy. When that happens and you wait too long to get back on track, all that hard work you’ve put in organizing your business budget can fall into disarray.
Mark your calendar for at least one monthly check of your money, although more often is better.
Lakhani-Bhatt checks the accounts receivable and accounts payable as well as the monthly invoices every two weeks in order to be able to identify any changes at an early stage. “Quarterly we review projects we want to do, review prices,” she says. “Annually, we conduct a full review of vendors to see if we need new technology.”
Commit to making reviewing your own company’s finances a priority and you can ensure you’re getting closer to your plans, or adjust your budget as needed.
7. If you don’t have time, delegate or hire
Ultimately, you may feel overwhelmed by the demands of keeping your business finances organized. Take your temperature beforehand.
Worried about not being able to pay your merchants and suppliers, or is your credit card bill escalating uncomfortably? Do you think your spending might be too high but not sure how to reduce it? Are you behind on your quarterly estimated taxes?
Be that as it may, if you cannot manage your business finances on your own, it may make more sense to delegate this to a qualified, trusted individual within your organization, or to hire an outside professional.
An accountant can perform duties such as monitoring expenses, paying bills, and recording transactions. An accountant can help with longer-term financial advice and taxes. Assess where you have gone astray to determine what type of help will benefit you most.
