Businesses finances are often confusing if you are new to them. Trying to understand them is one of those tasks that so many business owners procrastinate on! Trust me, understanding them will be so helpful. How can you know how well your business is performing without understanding your finances? You don’t want to end up in a situation where you are spending more than you are making. Or perhaps nobody warned you that you had to pay X amount of tax at the end of the quarter! Avoid nasty surprises by understanding exactly what’s happening and importantly stay on top of it throughout the year.

Here are my top 5 tips for keeping on top of your business finances:

Top 5 tips to managing small business finances

Learn how to read your Profit and Loss statement and Balance Sheet

Some business owners have had plenty of experience with P&Ls and Balance Sheets in previous corporate roles, however some have never had to look at one in their life. It’s really important that you understand these and can read them so that you can see what is driving your business profitability or losses. If you are using an accountant, that’s fantastic! Ask them to explain it to you though so that you can check in every now and then see how your reports are looking. Most basic business accounting packages make it so simple to view your reports, don’t rely on your accountant to send you one every quarter or every year! I would recommend a review at the end of each month as a minimum to keep track of your progress.

Cash flow is king

I’m sure you’ve heard it before but cash flow can make or break a small business. No matter how profitable your business looks, if your clients aren’t paying fast enough, or you have to pay lots of bills before receiving that amount of income, it could mean you are out of cash. Starting to rely on credit cards, overdrafts or loans can quickly become dangerous. I have no issue with business loans, leases etc. Calculated risk and income earning debt is not a bad thing, and is often the only way for business to grow. However, not being able to pay your most basic bills may present a problem.

Know your tax liability

I’m in Australia so this might be different around the world, but the principal is the same! Understand how much of your sales you need to set aside for tax. 10% of sales for GST in Australia. Using basic accounting software it should be easy to generate a report at the end of each month showing your GST liability. Set this money aside as soon as you can after the end of the month, so that you don’t get caught out at the end of the quarter when BAS is due. You may be liable for other taxes depending on your earnings, profitability and business structure, so speak to your accountant. They will tell you what taxes your business will have to pay. It’s a good idea to get in the habit of calculating your taxes straight after the end of the month, and put this money aside for when it’s due. It will reduce your stress levels!

Use accounting software

Top tips to managing small business finance

I’ve mentioned accounting software several times above. So often in business forums I see people who say “I really want to use xyz accounting software but it’s so expensive at $10 a month.” I always wonder, what is the cost of getting it wrong though? A spreadsheet leaves so much room for error. Most accounting software syncs with your business bank account, so that no transactions are missed. It saves you typing them in and reconciling them gives you the opportunity to do a quick double check on them. It allows you to see up to date reports. With some software your accountant can also have access, so they can go in and get the details required for taxes and any government recording. If your business has staff, invest in the better programs so that you can process payroll, leave etc.  In summary, it makes business life so much easier and is worth every cent!

Learn how to use a spreadsheet

OK so I just told you to use accounting software to track your business transactions but now I’m telling you to learn how to use a spreadsheet? Yes! Spreadsheets come in handy for all the things you may not be able to use accounting software for. They are so versatile and you will almost certainly have a use for them. Some of the reasons you might need a spreadsheet, they’re a great tool for preparing a budget, calculating staff costs, tracking cashflow and any “lists” you may have (like clients, leads, timelines, stock lists, social media posts etc.)

 

Using the tools above it should eventually become simple to stay on top of your business finances. Pick days of the week or month where you do a ‘financial health check’, and schedule these in. You’ll be surprised at how much more confident you feel being able to understand the exact financial position of your business.

5 tips to easily manage your small business finances

5 tips to Easily Manage your Small Business Finances
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13 thoughts on “5 tips to Easily Manage your Small Business Finances

  • April 5, 2018 at 12:18 pm
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    These are wonderful! My husband owns a business & I am starting to handle the finances – this was perfect timing!!

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    • April 5, 2018 at 12:46 pm
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      Good luck! My husband and I run a business together also. I started out as the ‘finance’ person but just didn’t feel like I understood everything I needed to. I wanted to understand it rather then just outsource it. So I got our accountant and book keeper to take me through everything rather than just ‘do it’ for me. It’s been of HUGE value!

      Reply
  • April 5, 2018 at 9:10 pm
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    As a content creator and blogger, I find these tips to be very useful. Thanks for sharing

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  • April 6, 2018 at 12:55 am
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    Thank you for these tips. I need these. Business finances can get overwhelming sometimes.

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  • April 6, 2018 at 1:22 am
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    these are such wonderful tips. My husband recently told me to keep track of our earnings and expenses for my business. I need to get on top of that. great post.

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    • April 6, 2018 at 7:27 am
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      If it’s very basic there are some free basic accounting programs too. Worth trialling if you aren’t using anything at all at the moment. Good luck!

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  • April 6, 2018 at 2:46 am
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    Wonderful and sound tips, for sure. Spreadsheets are a business owners best friend. It helps me make heads and tails out of numbers, providing stats from which I can make solid business decisions. Thank you!!

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  • April 9, 2018 at 7:47 pm
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    Keeping track of expenses in the business is one key way to success. Basic accounting knowledge like learning how to use spreadsheet keeps you up in the game. Thanks for sharing these great tips.

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  • April 26, 2018 at 4:27 pm
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    I am actually taking over the finances for my in-laws business. I am so glad I happened across this blog at the right time! Thank you for these tips, I am looking forward to getting more knowledgeable in these areas.

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  • April 27, 2018 at 1:15 am
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    Ugh, I need to find some accounting sw that I like and that I will use LOL. I’m relying on my own statements and its a little disorganized!

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  • April 27, 2018 at 1:30 am
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    Great article, this is something I’ve been dreading! The idea of managing my business finances freaks me out, I’m so afraid to do something wrong.

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  • April 28, 2018 at 6:18 am
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    Thank you for these tips! I am going to hold on to them for the future. I would love to have a small business one day.

    Reply

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