Are you a business owner? Here's how to manage your finances better
If you have just recently started your own business, you are probably worried about your business finances. Usually, business owners tend to focus on the quality of their product or service, forgetting how to handle the finances of the venture. If this sounds like you, no need to worry! Here are 9 tips to help you manage your business finances better.
Every aspect of your business requires a plan based on multiple benefits and risk factors, including your finances. As a business owner, you have to organize a financial plan with your accountant at least 2 months before the beginning of the year. Your financial plan should include your yearly budget, department budgets, taxes, risk management accounts, payroll, and much more. If you are not sure where to start, you can always consult a professional accounting agency.
Many business owners seem to forget that they work as much as their employees, so they should get paid too. If that sounds like you, stop thinking that the extra money you will take will negatively affect your business. Start-ups mainly depend on saving up as many resources as possible before moving forward with their plans; however, your salary shouldn’t count as saving up. Your personal finances should stay safe and stable to help you focus on running the business. Paying yourself could help you avoid bad spending habits you could develop via using money only when you need it. Beware that if your expenses are not trackable, you could spend more than you need to without noticing.
Payroll is usually handled differently in different companies. For example, some companies let their HR manager handle payroll, while others have a payroll specialist to handle the expenses. Regardless of the model you wish to follow, keep in mind that whoever handles your payroll process should be organized, good with numbers, and a quick learner. Furthermore, they should be ready to learn how to operate a pay stub creator system and other automated systems that they might need in the industry. Finally, your payroll specialists should always avoid payment delays and ensure your employees are happy and treated with transparency. Remember, your service depends on your employees!
Many business owners seem to start with the mindset of never applying for a loan; however, that shouldn’t be the case if you wish to keep your business running for long. Your business might require small loans from time to time, especially if you always have money in the market, like a product you are almost done with or a customer that is late paying their invoices. In these cases, loans will not harm your business, as you will be able to pay them before they even start to accumulate interest. Still, keep in mind that while small loans are manageable, large loans with more guarantees are not. Therefore, if your business intends to apply for a large loan, ensure you have a repayment plan set in stone even before applying for the loan. Large loans are scary if not handled well; therefore, avoid bankruptcy and always plan ahead.
Your business credit cards count as a small loan that needs to be repaid on time. Otherwise, you are in trouble. If you have more than one employee with a business credit card, ensure their receipt and business expenses are covered within 10-15 days of the day they used the card. The faster, the better. If you start paying card bills late, your company could lose its business credit with the bank, and so further assistance from the bank would be impossible if you were ever in a situation that needs help.
Depending on your business type, your billing strategy is important to avoid having too much money in the market and nothing inside the company itself. For example, if you deal with retailers, set up a system to contact them way before their payment is due as a reminder and set up multiple reminders afterward as well. Late customers can’t run away from you in this case, and you will eventually get the agreed-upon amount.
Even if you are sure you have enough to pay for all the expenses for the year, having more expenses is never a bad idea for your business. Investors are always looking for opportunities to showcase their wealth and earn even more money from promising start-ups. So if you have plans to expand in a couple of years, an investor promising enough money to help you expand now might be what you need.
Taxes differ according to currency, laws, tax deductibles and non-deductibles, and so on. Not paying your taxes on time could result in a criminal lawsuit in most countries; therefore, ignoring tax payments shouldn’t be an option. Normally, your financial plan should have a budget set for tax payments; however, if you discover that paying your taxes every quarter is too hard to track, try to spread your tax payments to monthly payments. This way, you reduce the financial burden on your accountant every three months and simply add your tax payments to your monthly expenses.
Generally, auditing is a good financial habit a business owner should develop. Leaving all the work to your financial department means that you trust them. However, your overall business plans depend partially on your finances; therefore, a financial audit is essential to help you prepare for the years to come, organize your expenses to essential and non-essential, and even avoid human error. If you find that some expenses could be removed during your audit, organize the plan better for the next couple of months.
Finally, remember that as a business owner, you don’t have to be a financial guru familiar with the monetary aspects of the business; however, you still have to understand the basics and ensure you follow up with your accountant or accounting department as much as possible. The success of your business doesn’t just depend on the idea. Good management and financial planning are essential aspects of any success.