The entire reason for most people behind starting their own small (and hopefully one day to be large) business is to make money. This is the exciting part of being successful in business; you can see your profits build up as a tangible way to prove to yourself that you’re doing well.
Unfortunately, when you make money you also need to manage that money, and that isn’t always seen as quite so exciting. Yet if you want your business to last for a long time and you want to do as much as you can with the money you’re making, it does need to be managed well. Whether you outsource some of this work or continue to do it all by yourself, it will still need to be done. Here are some things to consider when you need to manage the money in your business to ensure you don’t lose it all and have to fold.
Have Separate Accounts
When you first open your business, you might have tried to keep things simple and just have all the money you make go into your own personal account. This is something that many people do choose to do, and if they are the only person working in the business and the money is all theirs, why shouldn’t they do this?
They shouldn’t do this because it can become very complicated as time goes by and the business grows. It’s much better to keep your business and personal money separate by having two different bank accounts. To start with, there are some great deals you can get for opening a business bank account, and you might be able to take advantage of some of these. As well as this, though, and more importantly, you won’t use up all your profits buying personal items.
If you have a separate account for your business transactions, you’ll be able to pay suppliers, you’ll be able to see exactly what income you have, and it will make things easier when it’s time to do your taxes. Simply pay yourself a set sum of money each month into your personal account, and you can do whatever you want with that. The rest can be kept safe so your business continues to run smoothly. You won’t accidentally overspend and you won’t be confused as to what has been paid. It’s much less complicated this way and will help you to manage your money more effectively.
Make Finance A Regular Task
Because not everyone enjoys looking at their business finances and checking through bank statements or ensuring that bills are paid on time, these tasks – and many more – can be put off. The problem is, the longer these tasks are left for, the harder they will be.
It’s a better idea to put aside a little time each week, ideally at the same time each week so you can get a good overview of your business’s money and not miss anything, to work on your finances. In this way, the job will take less time, and because it’s regular, you’ll soon get into the habit of doing it.
When you have time to do your finances you can:
- Make sure all receipts are entered and filed away
- Process canceled checks
- Log your company mileage and gas usage
- Enter invoices and payments
Little and often is a good motto when it comes to business finances, and if you can stick to this routine you won’t ever feel overwhelmed about your money again.
Make Sure You Get Paid
It’s all too easy to send out an invoice and then forget all about it, especially when you’re the lone worker in your business and you have plenty of other things to be getting on with. Unfortunately, even though it would be great if everyone always paid on time, this is not always what happens, and much of the time you will need to chase up overdue invoices and ensure that the payment is made.
If you’re not aware of any outstanding invoices then it will be impossible for you to contact those who owe you to discuss payment. You’ll want to know when they are paying you and ensure you will be getting the full amount. If there are problems with the debtor paying because they are having financial difficulties, then you can come to an arrangement if you want to; but without knowing that the money was owed in the first place, it’s impossible to move forward. Even if your accounts look healthy, if you’re struggling to pay bills it might simply be that you’re owed a lot of money.
One way you can ensure that your income is not affected by late payments or by you forgetting to chase up money owed is to use factoring. Factoring means you outsource your invoicing to a third party. This factoring company pays you whatever it is you are invoicing your clients, minus their fee, and then they are paid by your client. If the money needs to be chased, the factoring company does it. In the meantime, you receive payment quickly and effortlessly. You can learn more about factoring and how it can help you to determine whether it would be a boon to your company or not.
Make Sure You Pay
It’s clearly an important element of business to know what money is coming in and whether or not your clients are paying you, but it’s just as important to know what money is going out and to understand what it is you owe and when the payment will be due. This may sound simple, but it’s easy to file invoices away and forget them, especially when many won’t have payments due for 30 days. The problem is, when you forget about the payments you need to make, you’ll soon have a pile of unpaid bills and, because you didn’t realize you had to pay, potentially not enough money to satisfy the debt. Consider using a payroll software for small business.
Paying bills when they become due is a much better way of handling and managing your money. There will be a steady cash flow in and out (especially if you use factoring), and your reputation in business will grow too.
