Last editedMay 20222 min read
Getting a business up and running is no mean feat. In order to keep things running smoothly, you need to continually keep your finances in shape amongst everything else. Effective financial management is vital for your business survival and growth, so you’ll need to plan, organise, control, and monitor all your financial resources if you want to achieve your business objectives.
In this post, we’ll offer up some top tips on how to manage your business finances, including a look at cash flow, taxation, and risk.
Manage your business cash flow
Your cash flow is the beating heart of your business, so you need to monitor it carefully, and look for ways to improve it, if possible. Identify your running costs and estimate how much cash you’ll need to stay in business each year. You’ll also need to forecast how much cash you need for your day-to-day business activities, and make sure you have an emergency fund in place, for unexpected costs.
Even if you’re in profit, a lack of immediate liquidity can present you with difficulties, for example, if you’re unable to pay the rent or employee wages. Make sure you know exactly how much your business needs to survive and don’t go below this.
Make sure you have the right stock levels available so that your capital is not tied up unnecessarily. Use inventory software to keep track of stock levels.
Monitor your business finances on a regular basis to see how your business is progressing. You need to know how much cash you have in the bank, the volume of sales you’re taking, and your stock levels. Review your position against targets set in your business plan.
Ensure customers pay on time: provide customers with plenty of ways to pay you and make it clear when payments should be made. Your business could run into serious problems if you’re getting paid late. Create and send invoices quickly, and make sure they’re accurate. Using an invoicing software or credit management system can help streamline the process and help you keep track of your finances.
Manage your business accounts
Good record-keeping is essential, and this includes knowing how much you need to pay suppliers. Late payments could incur fees as well as diminish your relationships. Using a good record-keeping system will help you keep track of expenses and debts, so you’ll know if you need to apply for extra funding.
Register your company for tax and consider getting an accountant to get you started on the right track. Setting up a separate account for collecting goods and services tax (GST) or having a direct feed to your accounting software (for example Xero) can help you get into good habits. By law, you may need to keep certain tax records for up to 10 years. Plus, you should be aware of the deadlines for filing returns in order to avoid being fined.
Make sure you ask your accountant about possible tax deductions (for business-related expenses) and tax concessions. These concessions could relate to your income tax, GST, capital gains and fringe benefits.
Manage your business risk
It’s crucial to have a risk management plan in place. Then, you can spend your precious time running your business rather than worrying about the future. Make sure your business insurance is comprehensive enough for your needs and develop a business continuity plan. Aim to have a diversified customer base to lessen your risk and check that your business reputation is robust.
Monitor the efficiency of your day to day business activities
Aim to ensure your day to day business activities are as efficient as they could be. Perhaps you could save energy by implementing changes in behaviour, or use equipment more effectively? Some areas to look at include project management approaches, or things like office heating, lighting and air conditioning.
Good financial management should be a priority for your business and be included in your ongoing plans. If you don’t have an accountant, accounting software can help you keep track of your finances and help you stay compliant.
We can help
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