It’s tedious and often time-consuming, but getting your finances in order is extremely important for your small business. A study from the University of Technology, Sydney, revealed that one of the reasons Australian companies fail is bad financial management.
Organising and staying on top of your finances seems intimidating. The good news is that there are things you can do to streamline your processes so you can focus on running the business while keeping your finances in order.
Keep accounts separate
The first step to organising your finances is to ensure you don’t mix your personal and business accounts. Even if you’re at the early stage, and no matter how small, you have to open a separate bank account and credit card for your company.
Doing this will prevent confusion about what you spent and where the money went. It will also save you time from sorting your transactions come tax time.
Establish an invoicing process
When you were just a one-person team, invoicing at will or whenever a project is finished may have worked. But as the business grows, you want to make sure that you efficiently invoice your clients and get paid on time.
Digital invoicing tools have advantages, such as time savings, improved accuracy, better client relationships, and simplified payment collection.
Automate recurring bills
Think about your regular bills – rent, mobile plan, internet and subscription services. Are you still paying them manually? Consider automating these bill payments if you haven’t yet.
Of course, you still need to check any discrepancies on the bills, but this will save you time and help you avoid charges for late payments. Another thing is that you have to ensure that you have enough money in the bank to pay these bills.
Ditch the paper!
In this digital world, it’s surprising to learn that 56% of workers in Australia are still heavily reliant on paper. Are you still piling bills and keeping receipts? Paper files could be easily misplaced, which means you can lose vital data and make bookkeeping a nightmare.
If you’re still using paper or maybe inputting financial data in desktop-based software, it’s time to consider using cloud-based tools. Cloud accounting software, such as Xero, allows you to get real-time insights to monitor your finances anytime you want. These accounting systems also allow integration, which means you can put all essential data from other online tools.
Another important reason, as more Australians prefer a hybrid work model, as the owner, you want to make sure that you embrace technologies that allow your staff to work remotely. You can give your accountant or bookkeeper access to your accounting software to do the work and keep your books updated even if they don’t report in person in the office.
Work from a budget
Many entrepreneurs face trouble because they run their companies without a budget. They don’t realise that a budget is as fundamental as having a business plan.
A budget is a tool that tells you exactly where every dollar will be spent. It also allows you to quickly check whether or not your business has enough incoming money to pay its expenses.
If you don’t have a budget in place yet for your small business, consider seeking the expertise of a Virtual CFO. A VCFO can help you establish a carefully analysed budget, forecast expenses, and understand your numbers.
The reality is that many small business owners struggle to monitor their finances. Unfortunately, this could mean missed opportunities, strained client and supplier relationships, and eventually, the business closing up shop.
Although it will take time and effort to gain control of your small business finances, keeping it afloat and positioning it for future growth is fundamental.
You don’t need to do it alone! A qualified bookkeeper and a numbers expert can help you get on track and stay on top of your finances. Cloud CFO offers customised accounting services ideal for small businesses, startups, digital and creative firms who don’t have a budget for a full-time bookkeeper or CFO. Please give us a shout and #letstalknumbers.