To focus effectively on your company’s product, and the creative aspect of running your business, you need to have a clear mind and a healthy budget. But if your financial accounts are unstructured, you’ll have neither. Your focus will shift from creating and working on new business ideas to stressing over reasons why your numbers won’t add up.
Launching a start-up involves several tasks — market research, product development, registering your business — and ensuring your accounts are streamlined to help you hit the ground running. Even if you’re a seasoned start-up, it’s vital you get your finances in order so your company can run smoothly, efficiently and — more importantly — in accordance with the law.
The key is organisation!
So, here are four ways you can tackle all your accounting problems and remain sane and systematic:
1. Separate Personal and Professional Transactions
Personal purchases using your business account can be deceptively convenient, but “the business can pay for it” mentality can develop into a bad habit. If you’re not careful with spending the right money for the right purchases, you’ll end up with more accounting headaches than you have time for.
Sure, you can repay your company if you do make a personal purchase through the company card, but this doesn’t mean you should abuse the privilege.
What you should do: Have a separate credit card or bank account for personal and business use. This way, you won’t need to frantically sift through your invoices to analyse where you’ve spent the money come returns day. Always remember that company expenses should be separate from your personal expenses and only be made using your business account.
2. Get an Accountant
Small businesses tend to lose track of their accounts due to a lack of bookkeeping skills and financial organisation, yet many owners attempt the task themselves. Additionally, start-up owners tend to neglect financial obligations because they’re wearing many hats — particularly in a business’ infancy.
What you should do: Hire a professional. Don’t assume you can handle the financial side of your business yourself. Accountants can save you a lot of money and time as they’ll assess financial journals, examine your expenses, monitor your revenues, and make sure your taxes are calculated and prepared. Accountants will make sure that all your transactions are up to date, help you analyse business operations, and advise you on financial strategies to minimise costs and potential project revenues.
Even if you think you can do your own accounting and would like to save yourself from accountant expenses, you should initially seek professional advice or consult a bookkeeper for your first month or two. However, a good accountant will almost certainly keep you in the green and assist you in making significant deductions for your business.
3. Monitor Your Expenses
Labour expenses can be quite significant. Whether you have a small number of employees or a relatively large team, the amount of money paid to them can be quite substantial. If you don’t monitor those expenses properly, you could end up paying too much or too little. The latter can end up being an unwanted, time-consuming HR battle.
What you should do: To avoid potential payday problems, thoroughly check and analyse labour costs. Be sure to cover each area from salaries, benefits, bonuses and any other labour related expenses to find solutions to any outstanding problems.
For instance, if you feel you’re paying too much in unwarranted bonuses to a specific employee, it’s time to make amendments to the way you operate. Arrange a meeting with the employee and either extend the period the bonus applies to or set new goals to ensure your business gets results, which you can then rewarded appropriately. You could even pay a higher bonus than you did in the first place. The point is, you do not want unnecessary payments going out when no growth or customers are “coming in”.
Even if you’re the sole employee of a business, you need to track every detail associated with labour expenses, so you don’t overspend the company’s budget. This means you can invest any saved money back into the business or on other employees.
Although labour expenses generate the most significant costs, there are a few other expenses you should monitor carefully and document the money spent. You need to ensure you stay organised and keep your business expenses receipts for tax reasons as well as for your personal record:
– Food and entertainment: You might hold an important business meeting in a restaurant — often a great way to negotiate deals due to the informal setting. Keep the receipt and make a note on the back of it about the purpose of the meeting and who was in attendance.
– Business travel: The authorities are often diligent about people claiming business expenses for personal reasons, including travel. By keeping each travel receipt, you’ll have yourself a “paper trail” of all of your business endeavours as evidence.
– Vehicle costs: Make sure you record where and when you use your vehicle for business matters and then apply the appropriate sums to your vehicle-related costs.
– Home office: Similar to vehicle costs, you should calculate how much of your home is used for your work and then apply that figure to your home-related costs.
4. Organise Your Invoices
This may seem rather obvious, but a lot of small business owners often miss payments they are due to receive because they’re not focused and up to date with transactions. A lack of organisation means a lot of business owners end up taking another project/client without receiving payments into their accounts in a timely fashion from previous work. Your schedule may get so busy that you forget some fees altogether.
What you should do: Track all of your invoices and client payments properly. You need to be uber-organised when it comes to invoices and keeping up with payments. Create a proper filing system you can refer back to on a weekly and daily basis. Use digital reminders on your device’s calendar, so you don’t forget to examine the month’s invoices.
Properly organised invoices allow you to chase any late payments and review those customers who have not paid for your services. You can then make an executive decision not to offer work to that client in the future, saving you a lot of time and money. After all, you’re in business to make money.
The key to having your money in order comes down to organisation and vigilance. You need to plan and write dates on a calendar for all your money issues — in the same way, you would when creating a new product. You may end up hiring an accountant who will do the sums for you come tax time, but what you need to ensure is that everything going into those accounts have been properly managed over the last 12 months.
Once you’ve done that, you could end up saving a lot of money when it comes to the end of the fiscal year.
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