Being a small business owner is so rewarding but it does come with a great deal of responsibility.
One of these responsibilities is staying on top of your finances. Even if your business is thriving and you’re not concerned about cash flow, you need to be aware of what’s going on and what your break-even point is.
None of us are the perfect business owner. However, those who are further up the ‘wealth pyramid’ do the following things to stay informed and in control when it comes to their money.
They do their ‘receipt’ homework
Make it a habit to record supplier invoices and receipts as soon as they are taken care of and you will save yourself from a lot of stress at BAS time (and BAS time rolls around fast!).
By doing this, you will be able to provide access to all the records you need at the press of a button. This will save your bookkeeper hours and they will be able to focus on more value-providing services.
They make their financial admin a priority
Want to get ahead financially? There is no point burying your head in the sand and avoiding the administrative side of things, even if it stresses you out.
If you don’t have a bookkeeper, it’s your responsibility to reconcile your transactions and check your online accounting systems reflect what’s going on in your bank account. If you use a system like Xero for small business and know the right steps, you can do this with just a few clicks, even on your phone a lot of the time. Try to set aside some time each week, or even each day, to check your balances and reconcile transactions.
To take the next step up, enter your data or connect your relevant bank accounts to your cloud-based system, but hand responsibility for reconciliation and day to day management to a bookkeeper. This will free up your time.
They pay staff and suppliers the correct amount at the right time
Holding onto your money for as long as you can is one way to earn interest on what’s in your account but being overdue with bills and payments will end up costing you.
You may not be aware that your supplier added in their terms that they will charge late fees. If they are organised themselves, the expense will be added automatically to your unpaid bill.
When it comes to your staff, you have a legal obligation to pay them. Doing so on time will help you develop a reliable, loyal team.
Paying people and companies won’t take time out of your day once you are set up to automate the process as much as possible. For example, salaried staff can be paid at the same time each month or fortnight with the help of Xero for small business. You can do the same for regular suppliers.
For invoices and to pay staff who submit timesheets, the transaction should be as simple as checking a box or emailing your bookkeeper to say ‘This is approved’. With the right accounting system, their payment details will be on record so it will only take your bookkeeper a few mouse clicks to complete the transaction.
They get paid on time
Wondering where all your money keeps disappearing to? What if it never came in in the first place?
There are a few ways to make sure you are paid on time and don’t have long-overdue debts. These include:
- Requesting upfront payment before you even start a job
- Arranging an automatic direct debit for ongoing clients
- Using cloud-based accounting software so you can easily see who owes you money
- Sending automated reminders using Xero for small business or a similar platform
- Creating terms that include an additional fee for late payments
- Asking your bookkeeper to let you know if clients haven’t paid and being proactive about resolving outstanding accounts
They know their numbers
The magic formula of a successful business isn’t all that magic; you need to have more money coming in than going out.
While your accountant and bookkeeper are the ‘wizards of money’, you need to see yourself as their apprentice, and an eager one at that. As a business owner, if you have at least some understanding of how to interpret your profit and loss, balance sheet and cash flow statements, you will be better placed to make decisions about the future.
Even if the numbers don’t read the way you want them to, being aware of your financial position will help you get on the right track.
Once you are clear on your past, you can also start looking to the future. This will help you gain clarity around meeting your commitments for the next quarter and beyond.
Don’t be scared of the money side of running your business. Work with a bookkeeper who is motivated to help you achieve long-term success as well as balanced books and you will be able to grow and thrive.
Straight Forward Accounting offers Xero training for small business as well as full bookkeeping services. Book a free consultation to find out more today.