One of the most important aspects of a business’s success is good financial management. Many either have no solid financial management system or are not just focused enough on setting up theirs. If you’re a business owner who’s struggling to manage your finances, this is the best time for you to invest time and effort in improving your system.
Luckily for you, we’ve compiled some tips on how you can streamline your financial monitoring and reporting and set your business up for success.
1. Seek the help of a business advisor
One of the best ways for you to better understand business finance is to talk to an advisor who’s experienced and trained on such matters. These professionals can answer your business or finance questions, may it be about increasing your gross profit or streamlining your entire system. They can help you build a reliable internal account process for tracking your business expenses, developing or improving an existing business plan, and even finding new credible investment opportunities for your company.
2. Don’t mix personal and business accounts
Even if you’re a small business owner, it’s not smart to mix your personal and business expenses. Some problems you’re likely to face with this include messy accounting records, personal liability, or tax issues. Keep a clear separation of such expenses by having two different credit cards or bank accounts, one for business, one for personal use. Doing so will also make it easier for your accountant or bookkeeper to manage the books or pay for taxes without using the wrong budget or account.
3. Invest in the right software
Paying for good accounting software should never be viewed as an unnecessary expense but a fruitful investment. Particularly for small businesses, such a tool can make managing your finances easier. Plus, it’s a more affordable option than seeking an accountant’s services from time to time.
Almost all accounting and bookkeeping systems can help you track everything, from daily expenses, monthly income, payroll, and more. Some of the amazing features and functions to expect include data fetching, financial report generations, payroll processing, invoicing, automatic generation of tax forms, and expense management.
4. Determine expenses
As the business owner, it’s crucial that you personally know where your money is going. You need to determine which overhead costs are hurting your finances so you and your team can make a solution. The goal here is to ensure that your company will have enough monetary resources to fund fixed costs such as insurance, taxes, utilities, employee wages, and office rent, if any. You can use employee management or accounting tools to help you track your company’s expenses and better control your budget.
Also, it will make it easier for you if you’ll digitize all receipts with a scanner. Printed receipts often fade, so digitizing them can save you from the headache. Be sure to also properly categorized your transactions for daily, monthly, or quarterly review. This will help you produce accurate and up-to-date financial reports whenever you need to.
5. Stay on top of invoices and bills
Again, you’ll need to use reliable accounting software to keep track of upcoming or overdue payments. Doing so will allow you to determine when to chase late customer payments, prepare your invoices on time, and view your current financial situation. Ideally, reviewing invoices and bills should be done regularly.
For instance, it’s better to check your financial records daily, as well as look at Accounts Payable (AP) and Accounts Receivable (AR) reports every week. Your accounting software will provide you with the reports to help you prevent various issues from occurring. These may include invoice problems, vendor disputes, or bad debt write-offs.
6. Build a good business credit
One great asset you can have is a good credit score. This will give you a good financial standing in the eyes of various financial institutions, partners, suppliers, and even potential clients. If you still don’t have business credit, you can get on with an employer identification number (EIN). Just like in a personal credit score, a business’ credit standing will be based on amounts owed, types of credit in use, new credit, payment history, and length of credit history.
Contrary to what most individuals think, managing your business finance is more than just balancing your checking accounts or bookkeeping. As a business owner, you must look at your finances as your salvation during rough times and your company’s key to thriving in the market. Follow our tips above and practice effective financial management today!