Business finances can be overwhelming between the jargon and confusing breakdowns, unless of course you’re a finance professional, it can be task that is easy to put off. Despite the temptation “do it tomorrow” this will cause your all kinds of issues further down the line. To manage your businesses health here are 6 key steps to starting the process. Don’t worry it is never too late to get things tidy but it can prove challenging to do so.
1. UNDERSTAND THE FINANCIAL STATEMENTS AVAILABLE TO YOU
Financial statements can provide so much more information than simply profit, margins and expenses. Although especially profit is often the first and only thing to be examined if you are not sure what you are looking at. By understanding these statements better you can get more information to employ when making decisions.
Cash flow statements are vital to understanding your cash position and identifying risks. An in-depth breakdown of the statement is available here.
Balance sheets are a way of assessing the company’s net worth detailing your assets, liabilities and equity.
An income statement is an overview of your business’ income and expenses. This is key in understanding everyone’s favourite how much profit and loss you’re making.
2. CREATE AND IMPLEMENT A TAX PLAN
This is simpler than it sounds. If you have up to date bookkeeping, you can calculate your likely tax liabilities. In addition, planning can help to limit potential deductions. None of this is easy but it is well worth doing if you need help talk to an accountant!
Once this is done you can save the correct amount of tax to ensure you are not short when the tax man knocks. This is typically done but squirreling the necessary funds over the course of the year.
3. SEPARATE YOUR FINANCES
You and your businesses finances are not the same!
(For the other side of this coin our friends over at Cervello Financial Planning can provide expert help and detailed strategy for your personal finances.
As these finances are not the same you should have separate accounts. This will lead to no confusion over what goes where and avoid tax troubles. In addition, whoever does your books will thank you!
Opening a business account means you can link this directly to you accounting software ensuring accuracy. It also makes a clear distinction between the two finances.
Finally, a business account means you can access higher interest savings account aimed at businesses specifically. This can really pay off in the long run!
4. PROFIT FIRST MENTALITY – PAY YOU FIRST
An easy bit to skip as a business owner especially when first starting. You started this business normally because you had a vision of what your life could be with a successful business. An important part of that is making sure you get paid. This also serves your business in the long run as one day it could need your help financially!
5. CLOUD-BASED ACCOUNTING SOFTWARE
As alluded to in the separate your finances section using cloud software has many advantages. Bank feeds being one of them there are many more in terms of speed with which your data can be produced. This can be done yourself saving you time I doing it yourself or saving you money if your getting a finance professional to do it. Not only is this easier but you can access key financial information anytime anywhere.
6. MEASURE PERFORMANCE
Keeping an eye are your business performance is key. Here are 5 KPI’s you should be tracking. Create a regular time to examine these KPI’s and other relevant information. Making sure expenditures are in check and you are getting a return of investment on all possible activities.
Utilising these tips from the off is optimal for your business to thrive, despite temptations to cut corners long term financial health more powerful than short term wins. But do not stress if your business is more mature it is never too late!
IF YOU NEED HELP IMPLEMENTING ANY OF THESE TIPS OR SIMPLY WOULD LIKE US TO SET THESE THINGS UP FOR YOU GET IN TOUCH, EVEN IF YOU HAVE NO INTENTION OF BECOMING A CLIENT, WE ARE HAPPY TO HELP.
07726 272 221 OR BOOK A MEETING HERE