We all need it.
We never have enough of it.
And we want to make sure that all of our businesses are making it.
Often, your business finances can seem like this huge and incomprehensible task that we try to ignore. We caught up with Robert from Avonmead Chartered Certified Accountants to see how we could get a better grasp on what’s going on…
A key step towards getting familiar with your finances is understanding your business. If you haven’t already, come up with a target market, think about what their need is and then work out what you can offer them. It doesn’t have to be “all singing and all dancing” you just need to identify what the problem you’re trying to solve is.
This helps you understand how your business should be structured and what sort of systems you need in place to manage your finances.
“You absolutely don’t have to be an expert in tax, but you should definitely speak to someone who is”
Good accountants will typically sit down with you to learn about the specifics of your business and ask questions to. Talking about money can be scary, but it’s so important to ask questions to get a better understanding about it.
They’re usually pretty friendly (after all, accountants are just people too!) and you can usually find one like Robert who just wants to help.
There’s lots of software out there, much of it is free, that can help you to manage your finances and forecast ahead. You can use systems that will integrate with your bank account so it can pull your transactions out to give you a live, up to date view of what’s going on.
It’s really important to invest in the right software though, so when you meet with an accountant, ask them about what would be best for your business.
Take small steps – you don’t need a 5 year forecast and business plan if that stresses you out. Ask yourself what you want to achieve and have key milestones to achieve. If a 5 year forecast is too much, try a 1 year forecast, or even 30 days. If you continually revisit what you want to do every 30 days, then it breaks down this process into smaller and more manageable chunks.
A lot of startups can fail because they’re too ambitious – sometimes it’s better to focus on making achievable steps. If you make sure these are aligned with your finances, then you can gradually build up to setting larger goals and milestones.
One really key area is around keeping on top of what your customers/clients owe you. Credit control is really important and quite often that comes back to you being on top of your paperwork.
Many small businesses fail because they aren’t paid on time. If you’ve provided a service to another business, you need the correct processes to invoice them and make sure you put the right information on the invoice; so that they know who to pay and how to pay them! You can even use software to automate something like this, meaning you can spend less time chasing invoices, and more time doing what you do best.
Obviously, for all business owners, there are deadlines for declaring and paying taxes. If you’re self-employed, the deadline for that is the 31st of January. If you leave this till the last minute, you run the risk of ending up with missing documents or invoices. This could result in a higher tax bill or penalties for submitting inaccurate records – something that none of us what.
Anyone can look at forecasts and think about cash flow, it’s not something you need a qualification for. In fact, a lot of us do this in our everyday life when it comes to managing bills and income. We’re used to thinking about saving money to go towards a holiday, it’s very much a similar approach with a business. You have to consider whether you’re going to invest it back into your business or whether you’ll draw it out.
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