Most entrepreneurs launch their small business with a view to following their passion and eventually achieving financial freedom.
However, while there is nothing better than making your passion your life’s work, achieving financial freedom can end up feeling a long way out of reach.
If you are one of those business owners who never feels comfortable and confident about the way your money is managed (not to mention the amount you have coming in), you’re not alone. The good news is that there is a way to find the organisational ‘sweet spot’ so you have better clarity and know you’re on the right track to achieve your financial goals.
Here are some of the reasons why you feel like your business finances are never under control:
You’re still living in the world of paper receipts
Having paper all over the place is messy and just plain overwhelming. At the very least you should have some trays to keep things organised but there are far better ways than covering your desk with receipts and invoices.
Switch to using software like Receipt Bank or Hubdoc to store receipts electronically. These give you search functions so there is no need to sort through a stack of papers when you need to check something.
These days, the ATO accepts e-docs shared through these platforms as evidence of expenditure so there is not even any real need to hang onto those ‘hard copies’.
You keep your accounting files on your desktop
Upgrading from pieces of paper to spreadsheets that are stored on your computer is a step in the right direction but what happens if you need to access information when you’re away from your device?
The other problem with spreadsheets is that they still require a great deal of manual work to create formulas and switch back and forth between pages and figures.
A cloud-based system is so much more effective, for the following reasons:
- You can access it on any device
- Many functions happen automatically
- You can create reports from almost any time period at the press of a button
- You can use it to automatically calculate your BAS and submit it to the ATO
- You can call up data in a number of different ways, including your Profit & Loss statement, your Balance Sheet and your Cash Summary
Using a system like this will save you time, either because you can learn to use it on your own, or because it empowers your small business bookkeeper to provide an exponentially more efficient service.
You’re not keeping business and ‘pleasure’ separate
If you are paying all your bills for work and home from the one account, you are going to lose hours and hours at tax time.
Your accountant will ask for bank statements and will question you on every line that doesn’t make sense. If half the records aren’t related to your business, you will need to itemise them somehow and remove them from your expenses. This is a fiddly job and can take a long time to do.
Create a separate business bank account; it should be free or very cheap to do so. Direct all payments to this account and don’t be tempted to tap into it for personal spending.
Even better; have a few separate business accounts. Set up one to put tax money aside, one for wages, one for outgoing expenses and one for profits/savings. This will give you far more clarity about how much money your business is really earning.
You are trying to manage your finances yourself
Bookkeeping and accounting qualifications exist for a reason. Yes, you can figure out how to declare your income to the ATO and how to keep your books balanced but isn’t your time better spent elsewhere?
And as the saying goes, you don’t know what you don’t know. There may be several expenses in your life which you don’t realise can be marked as a business expense. For example, if you are a small business owner and you purchase a car, it could potentially be written off as a tax deduction. This reduces your annual income and therefore drops your tax bill. Even if you are outsourcing your bookkeeping tasks to a Virtual Assistant, if they are not qualified as a bookkeeper things could be falling through the cracks.
Hand responsibility for staying organised to an experienced small business bookkeeper and they will make sure every dollar is accounted for throughout the year.
As a result, you’ll know how much money you are earning, how much you are spending and how much is left over.
Straight Forward Accounting offers small business bookkeeping services. Book a free consultation to find out more today.