Managing your business finances starts with banking
One of the most common financial mistakes in business is underestimating the importance of banking. Proper financial management starts with having a business banking account. Good financial management for small businesses must including separating your personal and business income and expenses. The golden rule for business owners, is to simply have to separate bank accounts; a business banking account and a personal banking account.
Small business finances follow same principles as big business. Have you ever reviewed a business bank statement but you still not sure which income and expenses are personal, and which are for your business? This scenario can be prevented by by separating personal and professional income and expenses.
Financial analysis and rational financial decisions in business is based on financial data, provided by your business bank statements. Don’t make the mistake of not separating your personal and business finances.
Professional financial practices to manage small business finances include; opening a business banking account. Separating personal and professional finances, using a professional accounting system, learning money management skills and understanding key accounting formulas. In addition remember to pay yourself a salary from the business account and avoid using your business to pay personal expenses.
Review your business bank statements weekly by using a budgeting template to clearly understand your business income and expenses. Remember you can only manage and improve facts about your business finances. Understanding your business finances by reviewing your bank statements will allow you to manage your business cash flow effectively.
Take your financial analysis a step further by understanding your business net income, fixed costs, current debts, and net profit margins.
Startup and Small business financial record keeping
Your business should move beyond bank statements to make better decisions to manage your business finances. Good financial management can be simplified by automating the record keeping process. Financial management tools help automate financial record keeping in your business.
Invest in financial management software to automate; quotes, invoicing, monitoring business expenses, net income, generating financials statements and financial reporting.
You probably thinking about the cost of financial management tools?
The good news is, there are a wide range of financial management tools available including free software to help small business owners.
Here are a few advantages of using financial management tools as part of your business strategy for financial management and reporting;
- Save time on business administration
- Save money on accounting services and payroll services
- Linking your bank account to the software automatically updates your financial records
- Accountant or administrator access
- Quotes, invoices and receipts are professional and automatically recorded
- Convenience, you can use your mobile phone to manage your business finances 24/7
- Quick access to important business financial information like; net income, income statement, cash flow and key accounting formulas.
Financial management software options
Wave Accounting is a free option for startups and small business. This is a cloud based accounting software which is free, however bank account linking is no longer available.
Sage One Accounting offers a wide range of features including linking to your accountant which reduces bookkeeping and accounting costs. Sage is a paid service which includes a monthly subscription.
Quickbooks Online offer a the full package depending on the plan your choose. In addition, a mobile App is available so you can invoice, view payments etc…… directly from the mobile App. Quickbooks online is a paid service with a free trial which includes a monthly subscription.
These are a few financial management software options for startup and small business owners. The software provides a snapshot of your business financial performance, cash flow, outstanding invoices, net income and net profit margin. Understanding this information will help you make investing decisions to manage your business cash flow.
Remember using these financial management tools should be accompanied by improving your knowledge of finances and help improve your business financial practices. Take time to see your accountant to ask questions and get a better understanding of key accounting formulas and a growth plan for your business.
Managing your personal and business credit score
Your business and personal credit scores affects your business when applying for business finance. This may include; a micro loan, home loan finance, asset finance, overdraft facilities, credit cards, business funding and consideration by venture capitalists.
Financial institutions check your business credit record when opening a business cheque account and when applying for any kind of credit. Keeping your personal and business credit record clear is extremely important to ensure your business qualifies for finance.
Review your business and personal credit record and score annually to ensure no defaults or judgements are reflected. Get professional help to clear your personal and business credit record by contacting Libertine Consultants.
Remember, managing your business finances is an ongoing process, which you need to control and monitor. Having the correct tools and information makes managing your finances so much easier. However, this does not substitute budgeting, controlling your business expenses, spending habits, controlling your net income and consistently managing your net profit margin.
Does your business need an Accountant?
The simple answer is yes, using financial management tools does is not a substitute for the services of a registered accountant and tax practitioner. Choose an accountant that has a good understanding of your business needs and is willing to explain important financial practices with you. This will help you make rational financial decisions based on accurate financial data, provided by financial statements and cash flow.
The sooner you learn how to manage your own small business finances, the greater your chances of success in growing your business. Take time to meet with your accountant monthly to discuss your business financial performance. Invest in books to help you increase your financial knowledge.
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