Many business owners find managing the finances a very boring task. It’s often confusing (or even intimidating), and it chews up valuable time where you might prefer to being doing something creative for your business. But it’s well worth making the effort to keep your business’ finance in order. Doing so will ensure that you’re not losing money unnecessarily, will help you to see where you could become more efficient, and will certainly help to speed up your tax returns as well!
Here’s a few things that should be on your financial checklist…
Separate ‘your’ money from your business’s money
It can be tempting to see your personal money as your business’s money, and vice versa. But you’ll be able to keep a watchful eye over your business spending if you separate your accounts. Open dedicated bank accounts for your business so you can see exactly what’s going in and out, and as a bonus, you’ll find that calculating your profits and deductibles is a much more straightforward process when you’re reporting your taxes.
Stick to a budget
It might feel constrictive and unnecessary, but it’s a good idea to come up with a budget of some sort. Don’t feel too stressed to plan out an absolute upper-limit on the amount you’re going to spend on various aspects of running your business, but do try to aim for a rough figure: this will help you to make rational decisions, and will stop you overspending by accident too.
Use tools to help manage your cash flow
Focusing on end-of-year profits isn’t a bad thing, but you need to scale back and look at your finances on a month to month basis too. Why? Well, it’s the only way to ensure your business has a healthy cash flow. Cash flow is important because it allows you to pay your vendors, employee salaries and direct debits. So, it’s a good idea to use tools to help you manage it.
There are free cash flow templates from places like SCORE, planning your finances over 12 months. It’s easy to modify and helps you to test ‘what if’ scenarios so that you can change your plans on a month by month basis if you need to. You can also opt for tools such as Mint, which uses an app to pull data from your various bank accounts so that you don’t have to manually update spreadsheets. It’s a good way of keeping track of your cash flow, and ensures nothing slips through without being documented.
Use software and hardware that’s been specifically designed to prevent data entry error
Use secure checks like these when you’re paying vendors, suppliers and employees so that you can be sure you’re not making data entry errors. The laser-printed voucher checks automatically capture invoice payment details and payroll deductions, so you can be sure you’re not accidentally entering incorrect figures onto your checks.
Also, these checks are good at guarding against fraud, too. You might not think that fraud is something that’s likely to happen to your business, but it’s better to be safe than sorry. They have watermarks, heat-sensitive icons, security coatings and security holograms to guard against criminal activity.
Keep an eye on your business’s credit score
Your commercial credit score represents the financial status of your business, and it’s crucial that your credit score is high if you want to be able to borrow money or goods from creditors or leasing companies, or even be able to work with particular vendors.
Find out your business’s credit score using the services of companies such as Experian, Equifax and Dun U& Bradstreet. This article can tell you more about each of these credit score checkers, and why you should be keeping a watchful eye on your business’s credit score.