The financial side of the business doesn’t interest many entrepreneurs besides knowing they are profitable and capable of meeting their obligations. It’s the ‘side line’ to their main purpose, whether that’s as a landscape gardening business, a law firm, or a building contractor. However, managing the financial side of things is a necessary evil. You’ve launched this business to make money, so you need to make sure you’re taking all the steps to make this accurate and a reality.
It’s actually not as complex as many think. In fact, we think you can break it down in to 3 core areas of focus. Get these right and everything will fall in to place (for you or your accountant!). These are the secret habits of someone successfully managing their business finances.
1. Take care of record-keeping daily
The financial side of the business involves a lot of mundane processes and record-keeping which are repetitive and, frankly, dull. The temptation is to save it all up and try to tackle it in ‘batches’, or worse, one hit each quarter.
It’s actually much harder to do when you take this approach, and eats in to your money making time. Instead, handle the finances as they occur. This means that at the same point you complete work, draw up the invoice, send it off and log it. The same occurs with payments coming in. Log them immediately.
It’s much easier to keep on top of. To make it even simpler, consider your bookkeeping practices. Cloud accounting software such as Pandle makes it easy to send, record, and track invoices ‘on-the-go’ ensuring that you don’t waste time on processes which aren’t the main backbone of your business.
2. Keep control of expenses
A similar theory needs to apply to expenses. Unless you keep a beady eye on these then they have the potential to unnecessarily eat in to profits.
Start off by having a clear system through which you and your staff can make purchases. This involves how payments are made, when they are authorised, and how they are recorded. There shouldn’t be time lags between when an expense is incurred and when it is recorded in your systems.
It is vital that you require purchase receipts. These should tally up with requests for making a purchase. You should also require that everyone follows the same process, otherwise it becomes complicated and mistakes can be made.
As well as taking a frequent approach to expenses, you should also look at expenses cohesively from time to time. Look at where most money is being spent and consider if this is appropriate or whether there may be other options which are more cost-effective.
3. Take time to consider options
When you need to buy something for the business, or engage a service, always do your research. Don’t simply go with a preconceived idea, or the first option you find. For larger costs you should always ‘shop around’. Don’t be afraid to negotiate either. For example, if you are buying 10 laptops for employees, then it’s time to negotiate a good deal.
Many small businesses fall in to the trap of thinking they don’t have time to consider options. We’d argue that you can’t afford not to.
Managing business finances isn’t rocket science, but there are some ways to make the process pay.