Starting a new business can be tricky. Businesses are very much like complex ecosystems and can face unexpected costs that unbalance them at any time, which in return can affect profitability. Your business can prove to be unprofitable if there is no way that it can be successful with the resources and activities you make around it.
Sometimes, business owners think that a business is not profitable, but in reality, all that is happening is that they don’t manage their finances well enough. An owner should know the expenses his business entails thoroughly. If not, money can be leaking from it, and the owner would not even notice.
In this article, we will give you sound advice on how to keep your small business finances under control.
You need to do accounting
If you plan ever to take your business seriously, you will need to do some accounting, even if you are starting out. This responsibility will keep growing as time passes and as your business grows. You should not leave this part of managing a business behind. Part of managing a business is to take the time to follow through where your money comes from and where it goes.
If you get to the point of being overwhelmed or if you need to save time, get yourself son accounting software, or even hire an accountant, someone who works as a bookkeeper for you. Try to hire someone you trust. Keeping a professional in the area close is the best option.
Keep track of the money you are owed
When a client pays you, you should keep track of it. Sometimes, depending on the business, you emit an invoice, and then your client can pay you. This works with regular clients and new ones alike, but keeping track of new ones is sometimes difficult.
You will need to have a system figured out. Consider using online invoicing software to do the job. Invoicing software will automate the job along with paying methods, so you track your cash flow.
Follow your money and give some reflection to it
After you bring to a close your time doing accounting, that is, listing costs, expenses, incomes, budget, etc. you have to reflect on the things that you listed on these pieces of paper (or accounting software sheets, for that matter). You need to be aware of many things.
You should review the pros and cons of some of your expenses.
You should examine whether or not some of your expenses are worth the investment. What makes them important? Does your budget allow you to expend this money in this way?
Are you making enough money to expand? Or should you retreat and minimize the way you invest so you can grow again?
Prevent future events to plan your business moves
Doing a projection is a common business practice. You will need to plan and prevent how your business will perform. It is often said that the projections themselves are not as important as the process you are going to engage into to reach them.
A business projection should be done with at least some amount of research. Ask people from your business field, ask associates, analyze the market behavior and plan.
Do not do a projection based solely on your trust in your product, or in your trust that the market will get better for you because of speculation, hopes, and faith. A comprehensive business projection should be based on previous events and consumer reactions on other products.
Keep your expenses away from your business accounting.
What you do on a personal level should remain separate from the money you use on your business. Ever heard of the popular saying “never mix business and pleasure”? Well, that’s exactly what it means. You cannot allow yourself to account for something that you are directly going to use for something personal.
When you want to do specific spending, take the money from a personal account. You can put yourself on a salary every month to keep control of your expenses. This way you will treat your business separately, as another entity outside of your money.