Every New Year, millions of us are inspired to use the fresh start as a spring-board to make positive changes to our lives – whether personal or professional. When it comes to your business, getting your finances organised and under control can be the perfect resolution.
It’s easy to fall prey to mistakes and oversights if you haven’t managed money in a professional capacity before, which many small business owners haven’t. Whether your finances are already firmly under control, or you think you could improve in this area, these tips could give you some financial organisation inspiration.
1 – Have a Realistic and Flexible Budget
It might seem like a chore, but setting a budget for your business is essential to staying on track with what you spend. Having a plan in place can help prevent over-spending, and allows you to identify your spending priorities. Allowing some flexibility in your budget is also a good idea, as essential costs can change over time, and might be more, or less, than you predicted.
2 – Pay yourself a Salary
Treating your business as your own personal fund might be tempting, but in the long run it is far better to pay yourself a set salary, which falls within your budget. Including your own pay as a set cost, rather than having it vary from month to month, makes planning expenditure far easier. Equally, though, be careful not to underpay yourself. You might want to live on a reduced budget to maximise business spending, but this is likely to be unsustainable. Running a business is hard work, and should pay yourself well to reflect this. Finding the balance is key!
3 – Digitise Records
Not only does it make keeping track of income and expenditure far easier in the long-term, but keeping digital records also protects you from the stress of lost or destroyed paper documents. Using a cloud-based service will allow you to access your records from anywhere, and protect them. This kind of software can be a really worthwhile investment.
4 – Keep Debts under Control
Many businesses will require credit from time to time – whether to cover start-up costs, or a later expansion. Clearly, it is vital to approach debt with caution. Knowing exactly how your repayment schedule will pan out, and accounting for this in your budget, is a good place to start. If you feel that your business is being overwhelmed by debt, it is worth seeking professional help.
5 – Separate Business and Personal Finance
Having separate accounts for personal and business spending is essential. In the early days of a business, it might seem simpler to keep everything together, but, over time, untangling business from personal expenses can be a challenging affair. Separate accounts allow you to see business expenses and income far more clearly.
6 – Account for tougher Times
When constructing a budget for your business, don’t plan to spend every available penny. The income of your business can and will fluctuate, so taking this into account is vital to your financial success. It can be tempting to reinvest heavily in your business to force it to grow quickly, but this kind of spending is unlikely to be sustainable. It is better to set aside funds to cover emergency costs in a market place which can be volatile.
7 – Establish a Savings Plan
As mentioned in the last tip, setting funds aside for financial emergencies is essential. Ideally, this should be enough to cover the running costs of your business for a few months. It can be useful to keep this fund separated from savings earmarked for business expansion. Whether hiring more staff, taking on a larger work-space, or increasing production, growing your business is likely to be costly. Saving for this growth is essential if you want your business to expand, and contributions to your savings account should ideally be factored into your budget.
8 – Set Targets
Targets are the single best way to measure progress, so whether your a global supplier of plastic strapping or a new start-up setting financial targets for your business is essential. Setting targets for your business also gives you a chance to consider your priorities, by ensuring you take some time to think about which areas you most want to make progress in.
9 – Consider hiring a Professional
If balancing the books really isn’t your forte, and your budget can manage it, you could consider hiring a professional bookkeeper to help you organise your finances. A professional will be able to ensure you pay the correct amount of tax, and keep your books organised, so could definitely save you a considerable amount of trouble.
10 – Review your Prices
Due to factors such as inflation and changing production costs, regularly reviewing your pricing structure is essential. When production prices rise, some companies choose to ‘absorb’ these costs rather than passing them onto the consumer, but this strategy might prove unfeasible for smaller businesses. When in doubt about what an appropriate price for your goods or services might be, research is vital. You might consider carrying out a customer survey, or examining the pricing structures of similar businesses. When pricing, it is important to remember that the price itself is less important than perceived value for money, so maintaining a reputation for quality is key.