Starting your own business is already a big feat in itself. Not everyone has the guts to actually get their feet wet and take the risk. However, along with the decision to start a business comes a long list of things you need to do.
One integral part of running a business is financial management. The main driving fuel of your business is money and if you do not organise it, your business will fail as fast as it started. A good sign of a well-managed business finance is when you are hitting your profit goals while balancing all your books.
Like managing your personal money, there are different ways you can manage your business finances too. Let us take a look at some of them.
#1 – Tracking Your Income
The very first thing you need to do when you want to properly manage your business finances is to track your income regularly. You should be tracking how much you make on a monthly, weekly, or even daily basis. This is so you have a better understanding of how much is going into your business.
Using a spreadsheet is the best way to do this. You can break down your income into different categories so you also have an idea about your income streams and where your money is coming from. If you are using a bookkeeping or invoicing software, tracking your income is easier because it can be automatically exported in just a few clicks.
You will also be able to monitor the standing of your business when the numbers fluctuate. This will give you an idea on how you can prepare for your future income goals.
#2 – Record Your Expenses
Of course, money doesn’t just come into your business. It also goes out in the form of expenses. Just as much as you are tracking your income, you should also track your expenses.
Purchases and other expenses will always be a part of a business. In fact, they are important to keep the whole business running. Tracking your expenses will let you know whether or not you are shelling out too much or too little.
Some businesses deduct their business expenses on their taxes and this brings down their taxable income. As a result, it also brings down the amount of profit. And, this happens when you are not tracking your expenses properly.
You can also use a spreadsheet when tracking your expenses. In fact, you can just maintain a single spreadsheet to track both your income and expenses so you can easily have an overview of your financial standing without opening too many sheets.
#3 – Start a New Bank Account
When you first start a business, you can usually manage your business finances while it’s being kept within your personal bank account. But, when your business starts making more money, mixing it up with your personal finances can cause a lot of confusion and it could cause profit loss if not fixed.
The easiest way to solve this is to start a separate bank account for your business. It would be ideal to do it as soon as your business is starting so you do not have to deal with all the transferring and computations.
Another benefit of starting a separate bank account is that you can easily work on your ledgers and books during tax season because you don’t have to worry about other money mixing up in the pile.
#4 – Protecting Your Business
This might sound a little far-fetched at first but having some sort of insurance or protection for your company actually helps you protect your business finances and separate it from your personal finances. You can do this by setting up an LLC or an S-Corp.
What this does is that your personal assets are protected in case you are caught up in a legal issue. Just make sure you renew all the needed licenses and certifications so you remain compliant. Take note of the schedules so you don’t miss it.
#5 – Consider Payment Gateways
Setting up your payment gateways can also determine how organised your income stream will be. You want payments to be easy for you and your customer. Your payment options also depend on your business model.
If your business is selling services, then the best way to accept payments is by sending out regular invoices. If you are selling products directly to buyers, then you can have the option of adding credit card payments or online payments aside from accepting cash.
There are other options out there too. So, carefully plan your payment gateways so you can find the right one for you.
#6 – Turn Digital
You really can’t get away with hard copies. Most of the important documents needed to start a business are in hard copies. However, you can pretty much digitise all the rest of the other paper works so you save more trees and you don’t run the risk of losing important files.
If you can’t throw out your hard copies, make sure you sort them out and file them properly. Among the files you want to keep organized are:
- Accounting records
- Bank records
- Contracts, leases, and purchase agreements
- Trademark and patent applications
- Licenses and permits
- Employee records
#7 – Schedule Meetings to Discuss Your Financial Standing
The last thing you need to know about handling your business finances is that you are not alone. Your business is not a one-man show and you don’t need to deal with all the stress of keeping track with your income and expenses alone.
You have a team and take advantage of your employees to help make things easier. Assign roles to your employees so they are focused on one thing. Regularly, meet with the entire team and let them report their part of the process to you and everyone else.
This allows everything to be covered without experiencing stress and workload. Plus, you will also be able to understand the situation better since you know you will be backed up with other people you trust.
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