This guide outlines how to keep your business financials in strong shape, no matter your size.
Your finances can be one of the most stressful elements of business. Debt, not enough disposable income, unpaid jobs — business financials are the stuff of nightmares, particularly if you want your business to scale!
Therefore, your company’s money is something you need to manage carefully. Don’t get ahead of yourself and make grand gestures unless you have the funds that enable you to. Take it slow and let things grow gradually. Hire new employees when you can afford to. Simple steps can really make a difference with business financials.
How to keep business financials healthy
Here, in a bit more depth, we will dive into ways you can keep your business financials healthy.
Invoicing
Cash flow is what will keep your business financials in the black. So, after every job or order, you complete, you need to ensure that you secure payment as soon as possible.
You want to input all of the necessary business financials details into an Invoice Template, to then be sent on to the client or customer. With this, they will be much more inclined to pay you promptly, rather than if they were left to their own devices. Using easy to read invoices also highlights that you are a professional.
On your invoice, it’s a good idea to offer clients multiple ways to make a payment. While bank transfers may seem like the easiest option for you, your clients may not agree. Card payments offer a lot more security and take less time to process, so think about using a payment provider to help you process payments in more than one way. Don’t forget to include a payment deadline as well.
Regular Financial Reviews
You need to be aware of exactly what your money is going towards. By checking on your business financials income and outgoings routinely, you’ll ensure that none of your business money is going to waste. This means looking at the software you’re paying for – are there cheaper or free alternatives? Assessing the money you put into training – could this be done internally rather than paying somebody externally?
Small changes can have a great impact on business financials over the years. However, you need to give this serious thought. You don’t need to scrimp on every aspect of business, especially if you think something is worthwhile. Try different money-saving methods out, as this could be the key to keeping your finances as healthy as possible.
Avoid Loans
Sometimes in business, loans are necessary for you to get off the ground, or to expand. However, you don’t want to take out a huge amount of borrowed money unless you can guarantee you’ll be able to pay it off within the time limits, considering added interest.
If possible, it is better to avoid massive loans, as they can get you into a downward spiral. A better option, if available to you, is to look into safer business financials funding, such as grants. This way, you’re not obliged to pay it back. Loans are a risk, so unless you’re confident you’ll be able to pay them back with ease, you should think long and hard before applying for one.
Don’t Work With Those Who Owe You
If you’ve provided a product or service to somebody and they haven’t given you payment, then in simple terms: do not provide them with anything more until they have paid what is owed. Some people can take advantage of your kindness, but in the world of business, there is no place for this. You don’t owe anyone favours.
Reinvest Your Money
Some business owners might be tempted to keep a tight hold of any cash they’ve made. However, this can lead to your business stagnating and you may fall behind the competition.
It’s important to reinvest your income into your business to improve and develop your services. Of course, there’s a balance to be had, as some changes won’t be necessary whereas others will boost sales and improve client satisfaction.
Think about what would help you to complete tasks more efficiently or capture the attention of customers in a positive way. For example, it’s always beneficial to invest in a good marketing strategy, but upgrading the quality of your paper or splurging on new packaging might not be the wisest business financials investment.
Know Your Taxes
Taxes can quickly creep up on you if you’re not careful. Always know when your tax return deadline is and calculate tax deductions and VAT (in the UK or Europe) as you go if it’s applicable to your business. It can also help you set aside money to pay your taxes throughout the year so that the lump sum you pay further down the line doesn’t cause any cash flow issues.
Don’t forget that, if it’s your first year of trading, you’ll be required to pay 50% of next year’s tax prediction as well, so always save a bit more than you think you’ll need.
Many businesses underestimate the dent that tax will have in theirbusiness financials, so make sure you’re not one of them. It’s also important to always pay your taxes by the deadline, as being late can result in fines, which will impact your business negatively.
Hire an Accountant
If you’ve been struggling to manage your business financials, hiring an accountant could be a good move. Not only can your accountant help you to manage your income and expenses, but they’ll be able to give you advice and help you to spot areas where your money could be used more effectively.
To give you the best visibility over your business financials while working with an accountant, use cloud accounting software. This will allow you to access your financial information from any device and you’ll always have real-time, up-to-date details. If you’re not already using software to manage your accounts, speak to your accountant about this when you first make contact.
Conclusion
In business, keeping your finances healthy should be one of your top priorities. Always ensure you know exactly where your money is coming from and where it is going. While this might be challenging in the early stages, building good habits will allow you to take control of your business financials health.
