5 Finance Tips for Small Business Owners
Stay on top of your small business finances with these tips for managing cashflow and budget
As a home renovation specialist you’ve got a lot to juggle, and the day-to-day running of clients, projects and schedules can get in the way of money management. We’ve put together some simple tips to help you get your business finances in order to keep cash flowing and your budget on track
Get paid promptly
You can’t guarantee that clients will pay you bang on time, but there are a few tricks to improve the chances. It makes sense to invoice as quickly as possible, or even just before you move on to the next phase of a project.
Make sure it’s easy for customers to pay you as well, by giving them clear online payment instructions, and state your payment terms and deadline clearly on the invoice. To make it even easier, try online invoicing software that will automate the process for you.
Houzz’s management accountant Lee Edwards says: “The key to getting paid quickly is to make sure the information is accurate on the invoice, especially around GST. One thing that some people forget to include (after getting everything else correct) is bank details.”
You can’t guarantee that clients will pay you bang on time, but there are a few tricks to improve the chances. It makes sense to invoice as quickly as possible, or even just before you move on to the next phase of a project.
Make sure it’s easy for customers to pay you as well, by giving them clear online payment instructions, and state your payment terms and deadline clearly on the invoice. To make it even easier, try online invoicing software that will automate the process for you.
Houzz’s management accountant Lee Edwards says: “The key to getting paid quickly is to make sure the information is accurate on the invoice, especially around GST. One thing that some people forget to include (after getting everything else correct) is bank details.”
Keep a record of expenses
Stay on top of all your expenses by setting aside a specific time every week to record them. Keep all your receipts in a folder, and once a week enter them into your accounts or finance software.
Want to make it quicker? There are a number of handy apps available that will scan receipts for you, so you can log them as soon as you get them.
Edwards advises: “Make sure you keep a clear description of each expense item and exactly what it was for. Some expenses are not tax deductible and if your accountant is not sure what your expenses relate to, they are more likely to record them as not tax deductible, so you won’t get tax relief for them. A clear description of each item will allow you to analyse the costs you are incurring better.”
Stay on top of all your expenses by setting aside a specific time every week to record them. Keep all your receipts in a folder, and once a week enter them into your accounts or finance software.
Want to make it quicker? There are a number of handy apps available that will scan receipts for you, so you can log them as soon as you get them.
Edwards advises: “Make sure you keep a clear description of each expense item and exactly what it was for. Some expenses are not tax deductible and if your accountant is not sure what your expenses relate to, they are more likely to record them as not tax deductible, so you won’t get tax relief for them. A clear description of each item will allow you to analyse the costs you are incurring better.”
Create a business budget
To properly manage your firm’s finances it’s crucial to create a budget. It’ll help you to anticipate how much money you can spend and save, both regularly and for one-off outlays.
A simple guideline is to first calculate your total income sources, including earnings, sales and any investments, loans or savings. Now you can balance this against your costs, including fixed outgoings like rent, bills, wages and services, as well as variable costs for materials, contractors, marketing and travel. Don’t forget to factor in anticipated one-off purchases like technology upgrades, new equipment or office supplies.
“If you go over-budget by 50 per cent, it doesn’t necessarily mean you are doing badly, it may mean your budget was wildly optimistic,” says Edwards. “Build in a variance to your budget to allow for small differences and review your position against budget at regular intervals. A budget can be changed at any time, and the more frequently you review the budget and make necessary changes, the more accurate it will be.”
To properly manage your firm’s finances it’s crucial to create a budget. It’ll help you to anticipate how much money you can spend and save, both regularly and for one-off outlays.
A simple guideline is to first calculate your total income sources, including earnings, sales and any investments, loans or savings. Now you can balance this against your costs, including fixed outgoings like rent, bills, wages and services, as well as variable costs for materials, contractors, marketing and travel. Don’t forget to factor in anticipated one-off purchases like technology upgrades, new equipment or office supplies.
“If you go over-budget by 50 per cent, it doesn’t necessarily mean you are doing badly, it may mean your budget was wildly optimistic,” says Edwards. “Build in a variance to your budget to allow for small differences and review your position against budget at regular intervals. A budget can be changed at any time, and the more frequently you review the budget and make necessary changes, the more accurate it will be.”
Bring in the experts
When it comes to your business finances, it could pay dividends to hire a professional to help. An accountant or financial adviser can help you calculate cashflow, keep on top of your book keeping and manage your budget. They can also carry out tax planning for you to help you make the most of allowances and ensure you don’t over or under pay.
Edwards says it’s invaluable to have “someone who is up-to-date on all the latest accounting rules and regulations to ensure you are meeting all of your financial and record-keeping obligations. If they do not meet these, business owners can face a huge administrative burden in correcting errors, which can affect the rest of their company.”
He adds: “A good accountant will also be able to give you valuable business planning advice, including advice on tax relief by taking advantage of the systems put in place that are designed to help small businesses grow.”
So, if you’re worried about the initial outlay of hiring a professional, consider how much they could save you in the long run.
Tell us
Do you have any good money management tips for small businesses? Share your thoughts in the Comments section.
When it comes to your business finances, it could pay dividends to hire a professional to help. An accountant or financial adviser can help you calculate cashflow, keep on top of your book keeping and manage your budget. They can also carry out tax planning for you to help you make the most of allowances and ensure you don’t over or under pay.
Edwards says it’s invaluable to have “someone who is up-to-date on all the latest accounting rules and regulations to ensure you are meeting all of your financial and record-keeping obligations. If they do not meet these, business owners can face a huge administrative burden in correcting errors, which can affect the rest of their company.”
He adds: “A good accountant will also be able to give you valuable business planning advice, including advice on tax relief by taking advantage of the systems put in place that are designed to help small businesses grow.”
So, if you’re worried about the initial outlay of hiring a professional, consider how much they could save you in the long run.
Tell us
Do you have any good money management tips for small businesses? Share your thoughts in the Comments section.
When it comes to running a business, cashflow is key. No matter how profitable you are, it’s the flow of cash that can make or break a business. Getting it right basically means making sure there’s more money coming in than there is going out, so it’s important to track cashflow regularly, either weekly, monthly or quarterly.
The best way to keep on top of cashflow is to make sure you get paid on time, and to balance this with the schedule of payments you make. Most businesses have cashflow shortfalls at certain points, however, so it’s a good idea to have a plan in place beforehand – arrange a line of credit with your bank in case you need to dip into it, or negotiate extended terms with your suppliers.