Running a business comes with multiple responsibilities. From managing clients, to marketing and the business’s finances, it can feel a little overwhelming. Because of how much there is to do for business owners, some things tend to fall through the cracks. Unfortunately, sometimes this is how they manage their finances. Finances are like the blood of a business. It carries nutrients to different aspects of the business to keep them functioning properly.
But, if too much goes to one area, than others tend to suffer. So, you need to have a well-balanced management system for your finances for your business to succeed. So, how exactly do you get this right? Here are some tips that should help you.
For small to midsize businesses, the temptation to throw all your finances into business needs might seem like a good idea. Let’s be honest: the extra bit of capital is quite helpful, isn’t it? However, you shouldn’t overlook paying yourself a salary. Remember, while your business is still small, you’re your most important asset, and if it doesn’t work out and you’ve only paid yourself for your basic needs, then you’ll be left high and dry without any money to bounce back on. So, appropriately evaluate your value to the business and pay yourself accordingly.
Secondly, you need to have a plan. When you start a business, you should have a goal in mind, a destination you want to reach with your business. To achieve this goal, you’ll need a financial plan. We suggest sitting down with a financial planner to go over your current financials so you can plot a course to achieve your goals.
Financial plans also have other benefits too. For example, when you have direction you can avoid unnecessary spending or risks that might hinder your business's ability to achieve your goals.
Reinvesting some of your profits into your business is a great way to promote its growth. For example, you could hire another employee, purchase machinery to speed up production, or even reinvest in furthering your own expertise by taking an online course.
Taking a loan has a bad stigma that surrounds it. Many small businesses tend to steer clear of loans or debt because they’re afraid of the future financial repercussions if their businesses fail. However, they need the capital to grow so they don’t fail. Seems like being stuck between a rock and a hard place doesn’t it.
Debt, when used incorrectly, can cripple you. But the opposite is true, too. If your business has a good credit record, then buying assets like property or vehicles that can be used to further your business will be easier.
Tired of client who never pay on time? Maybe you need to create a different payment structure. One that ensures you get the money upfront or at least a portion of it so you can pay your bills. Revising your payment structure when you run into issues like the one above is a great way to ensure a steady and consistent cashflow into your business.
You don’t want to be stuck in a situation where multiple clients aren’t paying you at the same time, forcing you to fall behind on your own payment obligations to your employees and other contracts.
One aspect of business that all business owners should familiarise themselves with is managing their books. While you’re still starting off, managing your books might be easy because you have limited transactions. But, as you grow and earn more, keeping accurate records is essential for tax and other reasons. Normally, business owners would hire an accountant or bookkeeper to ensure their books are in order.
When it comes to paying taxes as a business, the Australian government has given us some pretty decent ways to reduce how much we need to pay. Ask your accountant to help you limit your tax liability by allocating funds to tax-deductible expenses. By doing this, you’ll reduce the amount you need to pay for tax while still using that money to boost your business.
Small businesses grow by carefully managing finances and planning for the future. Follow these tips and do some of your own research to figure out how to manage your business finances in the best way possible. Remember, as you grow, the way you manage your finances might change, so be open to that and always search for ways to improve how you deal with business finances.
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