Handling Your Business Finances Right From Day One
Simply put, there are few things that matter as much to a well-run business as having a firm grip on the finances. If you can’t keep your money well organized, it won’t matter how well everything else runs, you’re still going to be struggling against ever-changing funds. Naturally, that simply isn’t an option for most businesses, but you need to be consistent and competent with your finances.
Rather than adapting to good financial practices as you go, you should make it a priority that you’re going to be dedicated to them from the very day that you open. Start as you mean to go on with the following tips.
Track literally everything
It doesn’t matter if it’s less than a single buck, there shouldn’t be a business expense that isn’t kept track of. Nowadays, this is made so much easier with the help of expense tracking software which can connect between your desktop, laptop, and mobile devices so you can track on the same account no matter where you are. Losing track of your spending is the easiest way to end up in financial hot water, so it is your responsibility to do what you can to ensure that it doesn’t happen. For any paper receipts, be sure to keep them stapled to some files that you keep organized by date so you can quickly look up and justify any expenses you’re not certain about, too.
Track your income too
Aside from tracking all those expenses, you should keep a tight record of how much you’re making. However, it’s important to be extra careful in organizing income. If you take invoices, you should include how much you are owed, but you should have a separate record of how much money has been paid, as well as what accounts receivable you are waiting on. Sometimes, it might be necessary to spend money that you don’t necessarily have yet, but you want to avoid doing it accidentally.
Work with a budget
A business needs to be flexible to a degree with its finances to make sure that it can react to new needs and challenges. However, outside of those occasions, your finances should be relatively easy to predict. One of the ways you can help make that reality is by operating with a budget that dictates how much money goes to what expenses, including bills, supplies, wages, and more. You should put some aside for things like reinvestment, as well.
Keep your business and personal finances separate
Simply put, when it comes to doing your taxes, responding to any financial inquiries like an audit, or simply tracking your comings and goings, you’re going to have a much harder time if you need to spend hours of the day tracking which expenses are and aren’t business-related. Open a business bank account that’s separate from your personal account. That way, you can also make sure you’re not accidentally spending any money on expenses not directly related to that account.
Work with an accountant
As soon as you can afford one, you should make sure that you have an accountant. Accountants are more than simply book-keepers (though they have an important purpose, too.) The primary purpose of an accountant is to give you tax advice. This is to make sure that you’re filing your taxes appropriately and correctly and, what’s more, filing them to fit a certain strategy, such as making sure that you claim on all expenses that you can, and not leaving any red flags that the taxman might want to investigate more closely with an audit.
Take care of yourself
A lot of small business owners will forgo paying themselves anything substantial or reliable when first starting the business to make sure they can put as many of the returns back into the business as possible. However, risking your own financial security for the business is not noble, nor is it smart. If you start having problems with debt and financial insecurity, it will start to affect how you run the business. Furthermore, the people most at risk of making financial mistakes are those who are desperate, so pay yourself a salary and don’t let yourself get put in that position.
Simply put, if you start off with good financial practices when it comes to budgeting, book-keeping, tax prep, invoicing, and more, then it’s easier to keep following those standards as time goes on. If you start with lax standards, it’s easy to watch them slip even further, leading to real financial distress.