This guide outlines how to start managing finances straight away in a new business to set things up for success.
When you’re setting up a new business, you want to get off to a good start. It’s not a great sign if things already seem to be going wrong from the beginning, so you want to get it right. Managing finances is obviously one of the most important things if you want to avoid having a big mess on your hands. You have to have a head for numbers or be able to pay someone who does so that you can stay on top of the money you have coming in and out.
Managing finances when setting up a business
To be managing finances well from the start, take a look at the important tips below.
Separate Personal and Business Finances
Starting up a small business can mean that the business is very close to your home life. It can be difficult to separate your personal life and work life when you’re so busy trying to get your business up and running. But one thing that’s important to do for managing finances properly is to separate your personal and business finances. You might choose a legal business model that allows you to do this officially. If you want to completely separate your finances, make sure you have a limited liability setup for your business. But even if you’re a sole trader or sole proprietor, be sure to separate your finances by having different bank accounts and avoiding mixing up your personal and business money.
Hire an Accountant or Bookkeeper
You can often do the basics of managing finances when you start a business, but it’s also useful to get some professional help. When you hire an accountant or bookkeeper, they can keep track of your finances for you and help with big issues such as taxes. You might only need someone to help you out during tax season or you might want someone who can provide ongoing support to ensure you stay on top of your finances.
Get the Right Software
Whether you hire an accountant or start managing finances yourself, you should have the right software to keep track of your expenses and your income. One of the best options to look into is online accounting services for startups. Online services that make use of cloud software are excellent if you want to be able to access your finances wherever you are. You can log into your account and see all of the data that you need, as well as link your accounting to other applications that you might need to use.
Track Income and Outgoings
Obviously, it makes sense to start tracking your income and outgoings as soon as possible. Keeping up to date with this will mean you won’t end up having to update everything at the end of the month. One easy way to do this is to have software and tools that you can link together in managing finances. If your accounting software automatically tracks the payments from your bank account or the sales on your website, you won’t have to manually input all of the figures. It’s essential to know everything that’s going in and out so you’re on top of your cash flow.
Stay on Top of Invoicing
Invoicing is something that you don’t want to delay when managing finances. The longer you leave your invoices, the longer you will be waiting for people to pay you. It’s important to get your invoices out as quickly as possible and have clear payment terms so that your customers know when they’re expected to pay. Some tools can automatically send invoices for you so you don’t have to worry about it. You could also set up automated reminders to make sure that your customers are prompted to pay on time. Don’t let your cash flow be disrupted by invoices that aren’t getting paid.
Don’t Delay Payments
As well as keeping on top of who’s paying you, make sure you’re not delaying the payments that you owe to other people. Putting off your payments could mean you end up owing late fees or interest if you pay late. When you pay on time, you’ll often get rewarded in some way too. Suppliers of goods and services want to encourage their customers to pay on time or even early, so they often extend incentives to get you to do so. Prioritize your expenses to pay them off on time and avoid incurring extra costs.
Be Clear with Budgets
Getting your budgeting right in managing finances will help you to control your spending and ensure you’re not going overboard. You should make sure to budget for all of the important parts of your business so that all of your expenses are covered. There are many things to take into account, from your marketing budget to the cost of IT, essential software, and your general overheads. It’s important to know what you can afford to spend and how much you’re paying in different areas of your business.
Benefit from Borrowing
Borrowing money is something that some business owners want to avoid, but your business can benefit from borrowing. In fact, some people leave it too late to take out a loan or use a credit card. If you wait until your business is in trouble to apply for a loan or credit card, that’s when you’re more likely to be turned down. It’s better to apply for credit when your business is in a good position. You can then use it to grow your business or keep it for emergencies so it can help you when you really need it.
Control Your Growth
Growing your business is important but it’s also necessary to control the rate at which your business is growing. Doing too much at once could mean that you find yourself with financial problems pretty quickly. You have to make sure that your business isn’t growing faster than you can handle and you’re not spending too much on business growth in the beginning. Control your spending to grow your business at a steady pace.
Final words
Get your business finances off to a good start by being organized and putting the right processes in place for managing finances.
