Being a small business owner can be tough. And, while some business owners are great with numbers, others find the financial aspect the hardest. All brains work in different ways, and we all have different skills. Nobody expects you to juggle every single element of your small business – there is too much going on for one person to do it all single-handedly. And when it comes to finances, you must be certain that you get right or you could find you are losing money in the long term.
While you’ll need a basic understanding of numbers to keep your business going, there are plenty of ways to thrive in the business world without being a mathematical genius.
If you’re struggling to manage the finances of your small business, the following tips should help. Always utilize the tools available to streamline your processes where possible…
Creating and sending invoices can be difficult. As a small business owner, you probably do this a lot. You’ll know that an invoice with a mistake can waste a lot of time and you might find that the more invoices you do, the more often mistakes are made. If this is something you’re familiar with, you might need an invoice template.
These are great as they make invoicing more straight forward and can send automated reminders to the client. Plus, you can pick from several different formats. Templates make finances much easier.
Hire an accountant
The great thing about being an employer is that if you’re not sure about a certain area of business, you can hire someone who is. Employers don’t know everything. In fact, one of their greatest talents is often knowing how to hire the best people.
So, keep on top of your finances by hiring an accountant you can trust. This will make the end of the tax year much simpler and reduce a lot of stress. If you aren’t sure where to look, try asking some connections in the industry. A recommendation is always the best.
One of the worst things about owning a small business is the admin. You find yourself spending hours on tasks that shouldn’t be so time consuming. Or one of your skilled employees ends up doing it and spending less time on more important things.
So, make your finances automated to save the hassle. Hopefully, this way nothing should get forgotten or go under the radar. This will need to be regularly checked up on though, to ensure that no incorrect or outdated payments are still going through automatically.
A separate business account
As a small business owner, you might find that your personal finances and business finances become intertwined. This isn’t advisable. You’ll lose out in the long run and have difficulty calculating tax.
You need to be able to separate your own money from business money. So, open a separate business account. You’ll be able to keep track of any profits and expenses without getting muddled.
Apps for expenses
Expenses can be another area for financial confusion. How much have you and any employees spent on behalf of the business? You need to find a way of tracking this without adding extra hassle. A great way to do so can be to use an app.
These simply track any expenses such as travel, lunch, or overnight stays, keeping them all in one place. So, instead of hundreds of receipts lying around, when you need to calculate costs you can simply log into the app and find them all in one place. It’s a much easier system.
Whilst it’s easy to dip in and out of the business finances to keep yourself afloat, this is not wise. You need to give yourself a set wage. Sure, you can increase this if your business has been successful for a substantial period of time but don’t take so much that you are then having to then transfer money out of your pocket back in.
Be fair and pay yourself a set monthly wage, just like the rest of your employees. This not only gives you and your business more financial structure but it ensures that your personal life is covered and you know what is going out of the business and into your bank account each payday.
Pay your employees
Following on from the above point – in some ways, this one might be even more imperative – you must always make sure a set wage and date of payment is agreed with your employees.
If you fail to miss staff payment or you give them a decreased amount of money, then the chances are they aren’t going to stick around. And then what are you left with? Recruitment can prove to be a lot more costly than looking after your current team members.
It seems simple and it is expected but it’s not uncommon for first-time business owners to make mistakes with this. If you have contracts written up stating you will pay your employees on set days of the month, you need to abide by it, as if you miss this, then you breach the contract.
Create financial reports
Wondering where all the money is going? By tracking it and putting it into charts with monthly comparisons you can see where you may be spending too much or too little. This can make it clear what areas you may be neglecting.
This is an insightful way to get more of a grasp on your business spending. You can also see which months more money came in, which will hopefully grow month by month when you are first starting up. Whatever happens, you need to make sure that you are not putting more into the business than you are getting back.
Of course, at the very start, you can expect to be down on your cash but once everything is up and running you must monitor the cashflow. Your reports can give you a better understanding of how, when, and where to manage your money.